House Financial Subcommittee Chair Wants To Reform Regulations

Financial issues are in the spotlight with the JPMorgan Chase loss and some filing lawsuits over the Facebook IPO. House Financial Services Subcommittee Chairman Scott Garrett (R-D5) sat down with NJ Today Managing Editor Mike Schneider to discuss the financial industry and what the government’s involvement should be.

Garrett said he was a little bit surprised about the claims that one of the major banks was not fully open with investors during Facebook’s initial public offering. While he said all the information isn’t yet available, he acknowledged that the stock underwriters claim they followed the law. “My reading of the report was that they said they released that information to not only the major investors but also got it out to retail investors as well,” he said. “If that’s all true then I’d say it’s no problem. It’s buyer beware, that there is no fail-safe investment in an IPO.”

When asked about the voracity of those on Wall Street, Garrett said just like any other segment of society, there are honest and dishonest people working in the industry and investors should do their research.

“If you’re an investor, retail or otherwise, if you’re making an investment in your pension fund or what have you, you should be doing due diligence. You should be investigating and making sure that you’re doing everything in your power to make sure what you’re getting is correct,” he said. “Of course the regulators have to make sure that they’re doing their jobs. They didn’t do their jobs in the past.”

Garrett said he believes reforms to regulations must be done. “And that’s just not me sitting here as a politician or me as a Republican chairman saying that,” he said. “That’s a bipartisan statement as well because we have now passed bills through the House, signed by the president that actually reformed the reform.”

He said he’s not sure if there are enough skilled regulators to do their jobs, but added that some may not be honest, citing how some regulators involved in the Bernie Madoff scandal actually asked Madoff for a future job. “That’s a problem for any segment of the government for regulation,” Garrett said.

According to Garrett, the Obama administration is trying to legislate the risk out of the marketplace. “You can’t create a free market, a capitalistic system, and have it in such a way that there is not risk in the system whatsoever so you know every time you invest, that your investment is going to go up,” he said.

Garrett also discussed what he calls “crony capitalism,” which he said has been on the rise during the Obama administration. “Crony capitalism is when the government, politicians get involved in the free markets and say, ‘I pick you and not pick you.’ And that is totally wrong,” he explained. “That creates the uncertainty in the marketplace because then you as a regular investor really don’t know what the rules of the road are. And you don’t know which politician is going to intercede and get in front of you in these situations.”