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 T
HE
 C
ONGRESSIONAL
O
 VERSIGHT
P
 ANEL
 
FOR THE
 T
ROUBLED
 A 
SSET
R 
ELIEF
P
ROGRAM
––––––––––––––––––––––––––––––––––––––––––––––––––
 
S
PECIAL
R 
EPORTON
R 
EGULATORY 
R 
EFORM
J
OINT
D
ISSENTING
V
IEWS
J
OINT
D
ISSENTING
V
IEWS
 
OF
 T
HE
H
ONORABLE
 J
EB
H
ENSARLING
 AND
 
 T
HE
H
ONORABLE
 J
OHN
E.
 
S
UNUNU
 
––––––––––
 
J
ANUARY
29,
 
2009
––––––––––
 
 
P
REFACE
 
As part of the Economic Emergency Stabilization Act of 2008 (P.L. 110-343), Congress requiredthat the newly established Congressional Oversight Panel (the Panel) prepare a report “
analyzingthe current state of the regulatory system and its effectiveness at overseeing the participants inthe financial system and protecting consumers, and providing recommendations for improvement, including recommendations regarding whether any participants in the financialmarkets that are currently outside the regulatory system should become subject to the regulatorysystem, the rationale underlying such recommendation, and whether there are any gaps inexisting consumer protections.
” Even in an environment where dozens of organizations havealready offered their own perspective on the economic crisis and regulatory reform, assemblingsuch a document in the short time the Panel has been in operation would be a daunting task.Adding to the challenge, the Panel is a diverse group which possessed a dedicated, but minimalstaff well into the middle of January. As a result, much of the work drafting the Panel Reportwas given to individuals outside its operation.Building consensus over such a broad range of economic questions would be difficult in anyevent. The timing and process for preparing this document, unfortunately, made it more so.Given the differences that remain regarding our views of the systemic weaknesses that led to thecrisis, and, more important, policy recommendations for reform, we have chosen not to supportthe Panel Report as presented. Instead, we provide here a more concise statement of theunderlying causes of the current financial crisis and a series of recommendations for regulatorymodernization. While there are several points in the Panel Report with which we agree, we alsoprovide a summary of several areas where our disagreement led us to oppose the final product.This Statement is organized into several sections:1. Introduction2. Observations on Current State of Financial Regulation3. Underlying Causes of the Credit Crisis4. Recommendations for Financial Service Regulatory Modernization and Reform5. Differences with Congressional Oversight Panel RecommendationsIn preparing this summary, we drew heavily from several sources, which presented a range of views, but in which we also shared many common themes and recommendations. These includethe Group of 30’s Financial Reform: A Framework for Financial Stability, the Committee onCapital Markets Regulation’s Recommendations for Reorganizing the U.S. Financial RegulatoryStructure, the GAO’s A Framework for Crafting and Assessing Proposals to Modernize theOutdated U.S. Financial Regulatory System, and the Department of the Treasury’s Blueprint fora Modernized Financial Regulatory Structure. Others playing an influential role in helping framethe often complicated policy questions engendered by this work include the scholars at theAmerican Enterprise Institute (AEI), particularly Peter Wallison and Alex Pollock, as well asthose at George Mason University’s Mercatus Center, including Professor Todd Zywicki,Houman B. Shadab, and Satya Thallam.
 
If one theme emerged among others in these differing perspectives on the challenges ahead, it isthat our pursuit should not be simply to identify new rules or areas in which to regulate, but tobuild a structure and system that is modern and appropriate to the institutions and technologiesbeing used every day. A well designed system should enhance market discipline, minimize risksto taxpayers, and avoid the pitfalls of unintended consequences. We hope our recommendationsare true to these objectives.Jeb Hensarling John E. Sununu
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