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TARP Panel Report Cites Regulatory Failures In Crisis

Posted By: Albert Bozzo | Senior Features Editor
CNBC.com
| 29 Jan 2009 | 08:27 AM ET

The Congressionally-appointed panel overseeing the TARP program today will release a stinging report of the regulatory failures that led to the current financial crisis.

A copy of the draft report, which will be presented to Congress, was obtained by CNBC.com.

“The regulatory system not only failed to manage risk, but also failed to require disclosure of risk through sufficient transparency,” the report concludes.

Among the report’s recommendations are that future regulation include better oversight of systemic risk, reducing the potential impact of “too-big-to-fail” institutions; improved transparency through “better, more accurate credit ratings” and better regulation of consumer products, which would “curb excesses in mortgage lending.”

The panel’s report also calls for the creation of executive pay structures “that discourage excessive risk taking.”

The panel was created under the Economic Emergency Stabilization Act, which was signed into law in October and authorized the Treasury to spend up to $700 billion in propping up the financial system.

The panel, known as COP (Congressional Oversight Panel), is headed by Harvard University professor Elizabeth Warren, who has been consistently critical of the TARP program’s administration under former Treasury Secretary Henry Paulson.

The 78-page report includes so-called “alternate views” from one panel member, which include making the Federal Reserve the “systemic regulator.”

The COP report also identifies three “highly technical issues” that have had a key role in the regulatory structure that need serious review by the agencies with oversight: accounting rules, securitization of debt and short selling. The report says COP also plans to “address financial architecture” in a future report.
© 2009 CNBC.com

URL: http://www.cnbc.com/id/28910947/