WASHINGTON — Congress members are trying to learn the causes of the drastic stock market sell-off to ensure that high-tech trading is monitored and average investors are protected in the wilds of Wall Street.
In the Senate, Sens. Ted Kaufman, D-Del., and Mark Warner, D-Va., are working with Senate Banking Committee members to use a pending financial regulation bill to address the Dow Jones industrial average’s sudden, brief drop of almost 1,000 points Thursday. The House has scheduled a hearing on the sudden plunge for Tuesday.
President Barack Obama said today that regulatory authorities are evaluating the “unusual market activity” with an eye toward protecting investors and preventing a recurrence. He said regulators would make public their findings and recommendations public.
Warner and Kaufman want to use the financial overhaul bill moving through the Senate to insist that the Securities and Exchange Commission and the Commodity Futures Trading Commission undertake a thorough study of high-frequency trading and other tools that move markets in the blink of an eye.
“We saw a living, breathing, real-time example today of the potential catastrophe that takes place if we don’t have an ability to make sure we adequately use this technology,” Warner said late Thursday. “We must have safeguards and really realize how some of these firms are using this technology to get an advantage over the everyday main street investor.”
“Right now, there is no way to know what is happening in this marketplace,” Kaufman said.
In the House, Rep. Paul Kanjorski, D-Pa., has called for a Tuesday hearing of a subcommittee to examine the causes of the sudden freefall and partial rebound, some of the most volatile trading in market history. Kanjorski has asked SEC Chairwoman Mary Schapiro to investigate the causes of Thursday’s gyrations.
The startling market dive and bounce, which lasted a mere 16 minutes, came amid doubts over Greece’s ability to confront is national debt and overarching stock market nervousness.
It also came as the Senate moved fitfully through a massive bill to put restraints on the financial sector, bickering over procedural delays amid periodic bursts of action.
The Wall Street plunge was unlikely to alter the outlook for the bill, which at this stage appears to be clearing a path for itself toward passage.
Over two days, Republicans and Democrats have voted together to adopt changes on how to liquidate large banks, split along partisan lines to kill a GOP consumer protection proposal as too weak, then joined again to defeat a liberal plan to limit the size of giant banks.
The parties are sure to spar again. And with senators ready to offer 100 or more amendments, time will become the point of conflict. Senate Majority Leader Harry Reid, D-Nev., says he wants to wrap the bill up by the end of next week. Republican leader Mitch McConnell of Kentucky wants to take his time. The Senate has scheduled no votes until Tuesday.
Still, Reid says he’s not in a mood for more patience. This, after all, is an election year and the legislative calendar is a fast-shrinking ledger. Reid anticipates the Senate will soon become preoccupied with a new Supreme Court nominee. The Pentagon wants a Congress to approve war spending.
What’s more, winning passage of the financial regulation bill in the Senate still means negotiating differences with the House, which has already passed its version of the bill.
If Republicans drag out the debate, Reid would need at least one Republican vote to join his Democrats to end a filibuster.
So Democrats were cheered Thursday when Republican Sens. Olympia Snowe and Charles Grassley voted with Democrats against the Republican consumer protection plan. Snowe already has won unanimous approval for two of her amendments, and Grassley is on record supporting a Democratic plan to regulate derivatives.
In both votes, the Obama administration prevailed. It had forcefully pressed to kill the GOP’s consumer proposal and had more gently argued against the bank size limits, arguing that size alone was not at the root of the 2008 financial crisis.
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