'Kind Of Scary': Congress Rewriting Rules Of Finance

U.S. Rep. John Campbell readily admits something not often heard from politicians in this economic crisis. When it comes to rewriting the rules of the financial system, the California lawmaker says he's not sure where he stands.

"I'm not sure even in my own mind," he says. "If I were king, I'm not sure what I would do at this point. And I don't think I'm alone. This stuff is not easy."

Campbell, a Republican on the House Financial Services Committee, says that in many hearings, the Democrats pick their witnesses and Republicans pick theirs. You can ask friendly questions you already know the answers to, or pose hard ones to the witnesses for the other side of the aisle. Usually, he says, you know what you want to hear.

Much of the new legislation for banking and investing will be written in the Financial Services Committee. That's prompted some soul-searching for Campbell.

"I'm favoring some very tough regulation," he says. Last fall's credit crisis "scared the hell out of me — and I do not want to go through that again."

'Just Be Good Students'

A recent committee hearing covered one of the central issues of the crisis: What to do about companies that grow "too big to fail." Do you break them up? Do you put them under superstrict regulations? Do you let them grow, but plan for their failure?

Minnesota Democrat Keith Ellison was still wrestling with it. "I don't know everything I need to know," he says. "Would a systemic risk regulator be as necessary if we did some antitrust action?"

Before getting elected, Ellison worked as a trial lawyer.

"One thing to understand is that many of us come here from various walks of life," he explains. "We're not necessarily bankers, and it's kind of scary when you think somebody who hasn't been doing this their whole life is now responsible for making decisions about our financial system. The fact is, I think it's critical we just be good students and keep on studying."

One lawmaker says he takes a stack of papers home with him every night. Every night presents a choice, he says, between skipping sleep and skipping supper.

Dangerous Territory

Regulatory reform sits at a dangerous three-way intersection: It's important, it's complicated, and it can be kind of boring.

Members of Congress sometimes look zoned out in the hearings, but there have been moments of theater. Last week, Treasury Secretary Timothy Geithner testified before the committee. Geithner spelled out the Obama administration's ideas for new rules of the road.

Geithner called for some way to deal with that "too big to fail" problem, but he didn't provide details.

Don Manzullo, a Republican from Illinois, pressed him for specifics. "I would think before you came up with this plan you would have some idea of how many companies would be subject to new regulation," Manzullo said.

Geithner replied that the details would get worked out in consultation with Congress. Manzullo wasn't satisfied.

"Do you realize how radical your proposal is?" he demanded, to which Geithner responded that the plan wasn't radical at all. Manzullo continued, "You're talking about seizing private businesses. You don't consider that to be radical?"

The Need To Get It Right

Outside the frenzy of Capitol Hill, some are urging lawmakers to slow down. Among the leading voices for caution is Paul Volcker, who chaired the Federal Reserve during the stagflation of the 1970s and who's widely credited with steering the country out of that crisis.

"There is a great political pressure to get things done in a hurry, to strike while the iron is hot," Volcker says. The House banking committee wants to take action, and so does the Senate one, he notes. Meanwhile, lawmakers are calling for the naming of a systemic risk regulator or for an investigation into hedge funds. "I guess my principal feeling is 'not too fast.' "

The lawmakers interviewed seemed to feel pressure to craft the right regulation and prevent another crisis. If they get it wrong, they risk slowing the economy down, creating confusion or failing to fix the problem at all.

And yet the clock is ticking. Democrat Barney Frank, who chairs the House Financial Services Committee, says he wants to put together legislation in a matter of months.

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