At the TMA/The Deal's Distressed Investing Conference in Las Vegas, Harvey Pitt, SEC chairman from 2001 to 2003 and CEO of Kalorama Partners LLC, gave a keynote speech addressing the current economic crisis. Pitt lays the blame on the current financial regulatory system.
"For the last decade we have had a 21st century financial services marketplace governed by a 19th century regulatory system," he said.
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Pitt outlined three faults in the regulatory system that have led the economy to where it is at present. Those faults include extending credit to those who were unable to repay it, creating a genre of financial instruments such as CDS without any regulation or understanding of long-term affects and a lack of internal and external transparency of exposure in the markets.
"As we seen with Bear Sterns Cos. and Lehman Brothers Inc., the counterparties had no idea how exposed these firms were, and naturally they pulled their credit lines, fearing the worst," Pitt said.
To solve these issues, Pitt suggests an entire overhaul of the regulatory system is neccesary and overdue. Pitt believes Obama's administration should merge regulatory organizations, repeal the McCarron-Fergusson Act and appoint an uber-regulator for establishing marketwide rules for investors. "The new administration will have to confront an evolving world of instability, the pressing need for regulatory reform and a restoration of confidence in our financial markets," Pitt said. - Maria Woehr
Comments
Great speech!
Mr. Pitt's firm is correctly spelled Kalorama Partners.