Paulson, Bernanke on Hill Next Week to Talk Financial Rules

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke will testify about financial regulatory supervision before the House Financial Services Committee next week.

Their appearance, expected July 10, could jump-start an effort to rework the financial regulatory structure. Lawmakers were expected to begin addressing the issue early next year, but one key member of Congress is suggesting that action could come sooner.

Frank

House Financial Services Committee Chairman Barney Frank (D., Mass.) said recent comments by Bernanke and Paulson have made him open to taking a closer look at some short-term changes that might help regulators deal with the ongoing credit market turmoil.

“Maybe they need something short-term,” Frank said in an interview.

When asked what that could be, Frank said he wasn’t sure but that it could relate to the Fed’s authority to lend to investment banks.

Paulson earlier this month called for faster changes to oversight of the financial system, saying the government must “move much more quickly to update our regulatory structure always keeping in mind that there must be a balance between market discipline and market oversight.”

In March, the Fed created a six-month “primary dealer credit facility,” which allows the Fed to lend to certain investment banks. The Fed has not said what it will do when the program expires in September. For it to extend the program, the Fed would need to declare that “unusual” and “exigent circumstances” persist in financial markets.

Still, Mr. Frank said it was unclear if a legislative remedy would be necessary this year.

“The answer is still probably not,” he said. But he said he was open to doing something if Bernanke and Paulson indicated it would be helpful. – Deborah Solomon and Damian Paletta