Hearing of the Senate Banking, Housing and Urban Affairs Committee - The State of the United States Economy and Financial Markets

Statement

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SEN. CHARLES SCHUMER (D-NY): Thank you, Mr. Chairman.

I want to thank my colleagues and my colleague from Pennsylvania as well.

I have a few questions.

First, you know, being from New York I talk to a lot of people who are involved in the credit markets and more and more and more it seems there's a disconnect. They are in a state of severe worry. I might even -- some I talk to panic about the brittleness, the frozenness of the credit markets which affects everything. And the statements that both Secretary Paulson and Chairman Bernanke have made have said, "Well, this is a problem but it won't even take us into recession."

My question is when we're now seeing credit really damaged in corporate lending -- lower grade corporate lending, this 20 percent that the Port Authority paid shows a brittleness and a inflexibility -- that's a good safe investment, the Port Authority. I don't know how many people think the Port Authority is going broke and you've got to pay 20 percent when the previous rate was 4.2 percent.

Aren't we reaching a point where the lack of confidence overall in credit in this country -- not just in housing, not just in student loans but throughout -- with the combination of the complex credit tools that have been used and the fact that people seem to have a sort of rather happy attitude about all of this until the housing crisis hit -- aren't you underestimated not paying enough attention to the severity of the problem in the credit markets which could become a much greater problem to the economy than the lack of -- you know, the slowdown in consumer spending?

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SEN. SCHUMER: Maybe they shouldn't be able to buy such a high percentage of these types of things in terms of systemic risk without any regulation.

Secretary Paulson?

SEC. PAULSON: I would say some think, Senator Schumer, this -- addresses this at least in part. One of the things we're working on very diligently right now at Treasury is developing a blueprint or regulatory blueprint for today's world and today's markets because we have -- if someone came down -- a man came down from Mars and you were trying to explain the regulatory structure and how this works the way the markets -- you know, the regulatory structure has not evolved with the markets. And it's a patchwork quilt in many ways. And so I -- hopefully when we're ready to unveil this that we could have some good discussion about this hearing.

SEN. SCHUMER: I think it's a good idea for you to look at that. And I am, too.

Thank you, Mr. Chairman. I thank my colleague from Pennsylvania.

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