After a closed-door meeting with more than a dozen local bankers, businessmen, and labor leaders Monday morning at Bradley International Airport, U.S. Senator Chris Dodd emerged to express a sense of hope that the $700 billion financial rescue package would begin to get capital moving again.
“I’m hopeful this week we’ll get a better response than we did at the end of last week,” Dodd, Chairman of the Senate Banking Committee, said before the markets opened Monday.
When the markets did open, nearly a quarter of the stocks on the New York Stock Exchange hit new lows within an hour and every stock in the Dow Jones index was down on the day.
“My hope would be that as we see people step forward and they buy this material, buy this distressed paper, the capital that’s out there will begin to move,” Dodd said. “It’s the frozen credit, the failure of capital to move that’s causing us much trouble.”
Dodd said it will take up to a week or 10 days to set up with auction process for the “so-called distressed paper.” The rescue bill allows government to spend billions of dollars to buy bad mortgage-related securities and other assets from distressed-financial institutions.
Dodd said the recently signed rescue bill also requires the Treasury secretary to report every 48 hours to the Banking Committee, creates a permanent inspector general position, and a General Accounting Office audit of the auction process.
Throughout the months of October, November and December, Dodd said the Banking Committee will remain active.
Some of the questions Dodd said the committee will begin to tackle include, “Where do we go from here? …What sort of financial regulation is missing? Is there over-regulation? Is there under regulation?”
William McGurk, president and chief executive of Rockville Bank, who attended the morning meeting with Dodd said, community banks in Connecticut are healthy because they don’t hold any of these no documentation or “liar” loans.
Still, McGurk said Congress needs to be careful when discussing regulation. “They should use a scalpel, not a sledgehammer,” he said.