Congress eyes probe of plunge in market
Senators said they hoped to use a financial-overhaul bill to address the issue. A House hearing also was set.
WASHINGTON - Lawmakers are trying to learn the causes of Thursday's drastic stock market sell-off to ensure that high-tech trading is monitored and average investors are protected in the wilds of Wall Street.
Sens. Ted Kaufman (D., Del.) and Mark Warner (D., Va.) said Friday that they were working with Senate Banking Committee members to use a pending financial-regulation bill to address the Dow Jones industrial average's sudden, brief drop of nearly 1,000 points on Thursday.
The House scheduled a hearing on the sudden plunge for Tuesday.
President Obama said Friday that regulatory authorities were evaluating the "unusual market activity" with an eye toward protecting investors and preventing a repeat. He said regulators would make their findings and recommendations public.
Warner and Kaufman want to use the financial-overhaul bill in the Senate to insist that the Securities and Exchange Commission and the Commodity Futures Trading Commission undertake a thorough study of high-frequency trading and other tools that move markets in the blink of an eye.
"We saw a living, breathing, real-time example . . . of the potential catastrophe that takes place if we don't have an ability to make sure we adequately use this technology," Warner said. "We must have safeguards and really realize how some of these firms are using this technology to get an advantage over the everyday Main Street investor."
Said Kaufman, "Right now, there is no way to know what is happening in this marketplace."
In the House, Rep. Paul Kanjorski (D., Pa.) has called for a subcommittee hearing Tuesday to examine the causes of the sudden plunge and partial rebound, some of the most volatile trading in market history.
Kanjorski has asked SEC chairwoman Mary Schapiro to investigate the causes of Thursday's gyrations.
The startling market dive and bounce came amid doubts over Greece's ability to confront its national debt and overarching market nervousness.
It also came as the Senate moved fitfully through a massive bill to put restraints on the financial sector, bickering over procedural delays amid periodic bursts of action.
The Wall Street plunge was unlikely to alter the outlook for the bill, which at this stage appears to be headed toward passage.
But the Senate has yet to address other aspects of the bill, including a bipartisan proposal to audit the Federal Reserve's emergency loans to banks during the months before and after the 2008 financial crisis.
Republican senators also have proposed to strike a provision in the legislation that would force banks to spin off their business in derivatives, the complex securities blamed for helping precipitate the meltdown a year and a half ago.