Hearing of the House Financial Services Committee - Systemic Risk and the Financial Markets

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REP. MAXINE WATERS (D-CA): Thank you very much, Mr. Chairman.

I'd like to thank you first of all for holding this very important hearing today. And I'd like to thank both Secretary Paulson and Chairman Bernanke for being here today.

Let me start by saying that which you've probably heard too often, how disappointed I am with all of us, members of Congress, from appears to have been weak oversight of our regulatory agencies and our regulatory agencies for what appears to have been weak oversight of our financial institutions.

I have to tell you I've been holding hearings throughout the country on the subprime meltdown, and I'm absolutely stunned by the extent of the devastation to some of our families and communities by this -- caused by this meltdown. I'm stunned when I hear about these exotic products and how they could ever have come into being without an oversight. I'm really stunned about some of the ARMs and the way that they've reset and the fact that there's something called a margin that I never knew about before, and that margin can be whatever the financial institution decides it should be above and beyond the going interest rates.

I came on this committee right after the S&L scandal and I heard a lot about reform. And so while I suppose I should be impressed with the fact that there's a president's working group on financial markets and the reports that have been issued, I'm skeptical about what is being proposed. As it said in March the president's working group on financial markets issued a report of recommendations for addressing the weaknesses revealed by recent events both at the international level and between the two reports -- and at the domestic level -- between the two reports focused on a number of specific problems including mortgage linking practices and their oversight, risk management and management of large financial institutions. And then there was, Mr. Bernanke, the blueprint that you talked about for a modernized financial regulatory structure and you proposed a new regulatory architecture and a third regulatory agency to be focused on protecting the consumers and investors.

I have to tell you I'm surprised because I thought that our regulatory agencies no matter how they were organized, whether it was by financial institution category or not, had as a prime objective, all of those things that you talk about doing now.

So what I really want to know is not so much what you plan that may not be instituted for some time because it takes some time to get this into practice, I want to know what you're doing now. I want to know what you know about services.

We have found that there is little if any regulation of market services and I want to know if you have anything in your plans to deal with them because after we get finished with all of the president's Hope Now programs and the money that we're giving to neighbor works and other organizations to do counseling, they can't do very much good because the services of the ones who make the decision, they're the ones that are in charge of these accounts, they decide to collect, well they have to collect the fees, they have to collect the mortgage payment, they increase fees, they agree to expand or modify arrangements but they can do practically whatever they want. I want to know what you know about them, what you're doing about them.

And secondly, I want to know and understand Mr. Bernanke what you know about the sale of Countrywide to Bank of America. I understand that Bank of America bought these mortgages at quite a reduced rate, and I want to know what that rate was and whether or not these properties can go back on the market appraised at a higher rate than the bank purchased it for and who gets the profit and the difference and why can't that go back to the homeowners who are losing their homes to foreclosures?

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