Bloomberg News

Former SEC Chairman Levitt Comments on Bush Speech, Bernanke

February 01, 2006

Former Securities and Exchange Commission Chairman Arthur Levitt Jr. comments on President George W. Bush's State of the Union address and the Fed's new chairman, Ben S. Bernanke.

Levitt, a board member of Bloomberg LP, parent of Bloomberg News, spoke in an interview.

On the possible market reaction to the speech:

``I think it was predictable; because of that I think the markets will react favorably,'' Levitt said. ``It's a stay-the-course kind of speech. You could have written it before it was given.''

On Bush's energy proposals:

``The president has repeated what he said many times before,'' Levitt said. ``He stayed away from an energy tax. He stayed away from anything that really could be unsettling to the markets.''

On Bernanke:

``As we move toward greater use of derivatives, which are largely unregulated, Bernanke is going to have to deal with that issue,'' Levitt said.

``On credit derivatives, for instance, the credit derivatives outstanding in General Motors exceed by far the amount of money going into the bonds of General Motors,'' he said. ``If there was a bankruptcy there, the need to come up with cash would be almost catastrophic in terms of its impact on the markets.

``How will Bernanke decide to deal with the question that (former Fed chief Alan) Greenspan has pretty much stayed away from? And that is, do we want to regulate these largely unregulated derivative markets?''

To contact the reporter on this story: Carol Massar in New York at cmassar@bloomberg.net.

To contact the editor responsible for this story: Erik Schatzker at eschatzker@bloomberg.net.


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