September 15, 2008
Statement From State Comptroller Thomas P. DiNapoli Regarding Financial Market Crisis
“The health of the financial services industry is the worst it’s been in decades. Governor Paterson is taking important steps to try to stop the hemorrhaging. The Federal Reserve must do its part as well.
“Wall Street hates uncertainty, and that uncertainty impacts even those firms with a strong book of business. The first goal of both New York and the federal regulators is to restore confidence and stabilize the markets.
“Governor Paterson’s call for the Federal Reserve to provide short-term liquidity for AIG sends a strong message: the problems at AIG are not rooted in its fundamental business, but stem from a crisis of confidence. If the Fed responds positively to the Governor’s request and gives AIG the liquidity it needs, some level of confidence may be restored.
“More importantly, the failure of Lehman Brothers and other financial houses should serve as a cautionary tale of the need to control risk. For far too long, federal regulators have turned a blind eye to excessive risks and over-leveraging of capital. Credit has been issued too easily and used too carelessly. Federal regulators need to step up and strengthen oversight. The markets need more robust regulations and more transparency.
“There must be a national focus on solving the crisis gripping our financial markets. The Lehman Brothers debacle can be a painful and short first step toward a market transition that stabilizes the crisis and points the way toward a more rational approach to risk management. Or, if nothing is done, it could be a crippling blow to American financial markets and our economy.”