Chairman Lincoln, Ranking Member Chambliss, and Members of the Committee, thank you for inviting me to testify before you today. The American people clearly sense that there is something deeply flawed in the current structure of our financial markets and the political process that has spawned them. One does not need to be a Ph.D. in finance or economics to grasp that the ship is way off course and in need of correction. Too Big to Fail is a demoralizing eyesore that even the CEOʼs of the largest firms agree must cease to exist. Losses of wealth, lost employment and economic activity and bailouts totaling trillions of dollars around the world are strong evidence of the failed structures of financial markets in their current form. The financial sectorʼs calamity has spilled over and done great harm to the lives of many Americans and people throughout the world.
When they are properly designed, financial markets play a fundamental role in the resource allocation for our society. Well functioning markets are an important means to achieve our societal goals. Financial markets, when
functioning correctly, serve to aggregate savings and allocate them to productive uses. Financial also serve to allocate risk to entities that bear it most comfortably. The system we had in place in recent years, and the one that is still in place as we meet today, has revealed profound flaws.