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Markets Rally, Bernanke Presses for Revamped Rules

Jeffrey Brown reports the economic news of the day, including the stock market's surge and Federal Reserve Chairman Ben Bernanke's speech on tightening federal financial regulations.

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    It was Wall Street's best showing since last November, and it got going when Citigroup reported it actually made money during the first two months of the year.

    The news fueled a rally in beaten-down bank stocks here and abroad. The Dow Jones Industrial Average surged 379 points, nearly 6 percent, to close at 6,926. The S&P 500 was up more than 6 percent, gaining 43 points to finish at 719. And the Nasdaq rose 89 points to finish at 1,358, up 7 percent.

    The market also took heart when a key congressman called for a new so-called uptick rule to limit speculation that stocks will fall.

    House Financial Services Chair Barney Frank also talked of easing a rule that marks the value of assets at today's market price, not their potential future worth, and he advocated more aid for small banks.

    REP. BARNEY FRANK (D), Massachusetts: More of that money has got to go to the smaller, to the community banks that are unburdened by bad assets, that are connected to the lending.

    So getting more money out to the small banks through the TARP, getting the uptick rule reinstated, and substantially revising the way in which mark-to-market is adopted. Those are three things which have now emerged that we're going to be focusing on and working with the administration. We hope they can be very soon accomplished, and we think they will add to that positive momentum.


    Earlier today, Federal Reserve Chair Ben Bernanke looked ahead to preventing future crises. In a Washington speech, he said a revamped system of regulation should focus on institutions deemed too big to fail.

  • BEN BERNANKE, Federal Reserve Chairman:

    It is imperative that policymakers address this issue by better supervising systemically critical firms to prevent excessive risk-taking and by strengthening the resilience of the financial system to minimize the consequences when a large firm must be unwound.


    In the question-and-answer session that followed, Bernanke went on to say there had been, quote, "shocking gaps" in the regulatory system up to now.


    I mean, who was overseeing the subprime lenders, for example? Who was overseeing AIG? There simply wasn't enough adequate oversight in those cases.

    And certainly one of the things that even a — even if you have an oversight — financial stability authority which has a relatively light mandate, really one just information-gathering and description rather than power, direct powers, an authority of that type could point out and identify such gaps and call them to the attention of the Congress, and Congress could then take the necessary steps.


    Those sentiments were echoed by Senate Banking Committee Chair Christopher Dodd. At a hearing on the issue, he promised, "We are going to send a clear message with these modernization efforts. The era of 'don't ask, don't tell' on Wall Street is over."

    The Dodd hearing was a first step toward crafting a beefed-up role for the Fed or possibly an entirely new authority.