Highlights: Bernanke, Geithner testify on Lehman collapse

WASHINGTON (BestGrowthStock) – The following are highlights from a U.S. House of Representatives committee hearing on the collapse of Lehman Brothers, including testimony by Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner.

BERNANKE ON BREAKING UP “TOO BIG TO FAIL” FIRMS

Rep. Kanjorski: “Are you are you not in favor of a (bill) as passed by the House and incorporated into the Senate bill authorizing the regulators with greater authority to break up organizations if necessary” because they have become too large to fail.

Bernanke: “I think it’s something that would be on the whole, constructive, and I’m certainly as a regulator certainly willing to work (with you).”

GEITHNER ON LEHMAN LIQUIDITY ISSUE

“I don’t know if that’s a fair statement (that the New York Fed was aware Lehman was overstating its liquidity). What I would say is that there is nothing in that experience that anything, but confirms our judgment, Mr Bachus, that Lehman was vulnerable to this gathering storm. Both in terms of how much leverage it had and in terms of how it was funding itself. We were deeply concerned about that.”

GEITHNER ON NEED FOR FINANCIAL REFORM

“Failure is inevitable in financial systems. The challenge for governments is to devise a system where failures of private firms cannot cause catastrophic damage to the economy. The sweeping financial reforms that this committee has passed, that the House has passed, and that the full Senate is about to consider are designed to deal with the vulnerabilities exposed by the crisis and illustrated by the Lehman example.”

U.S. REPRESENTATIVE PAUL KANJORSKI, CHAIRMAN OF HOUSE

FINANCIAL SERVICES SUBCOMMITTEE

“Lehman’s unscrupulous practices illustrate exactly why the Senate needs to quickly pass — and the Congress needs to swiftly finalize — a Wall Street reform bill. The bill already passed by the House would force major participants in our markets to hold more capital and leverage less.

“Additionally, the House-passed legislation and the pending Senate bill include provisions to end the era of too big to fail, like my amendment directing regulators to break up financial firms that have become too big, too interconnected, too concentrated or too risky.”

U.S. REPRESENTATIVE SPENCER BACHUS ON FED’S OVERSIGHT

“The Valukas report shows that, at best, the regulators failed to catch an accounting manipulation that permitted Lehman to give a misleading picture of its financial health to its investors, its creditors, the rating agencies, and the financial markets. As a result, what would have been a bad situation — the failure of one of the nation’s largest investment banks — was made far, far worse by the Fed’s failure to plan and coordinate the response to Lehman’s certain collapse.”

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Highlights: Bernanke, Geithner testify on Lehman collapse