The role for Congress in this financial crisis is multifaceted. The overall issue seems to be how to ensure the smooth and efficient functioning of financial markets to promote the general well-being of the country while protecting taxpayer interests and facilitating business operations without creating a moral hazard. Congress also has a role to play in preventing future crises through legislative, oversight, and domestic regulatory functions. Congress also plays a role in measures to reform the international financial system, in recapitalizing international financial institutions, such as the International Monetary Fund, in replenishing funds for poverty reduction arms of the World Bank (International Development Association) and regional development banks, and in providing economic and humanitarian assistance to countries in need. In Congress, numerous bills have been introduced that deal with issues such as establishing a commission/select committee to investigate causes of the financial crisis, provide oversight and greater accountability of Federal Reserve and Treasury lending activity, deal with problems in the housing and mortgage markets, provide funding for the International Monetary Fund, address problems with consumer credit cards, provide for improved oversight for financial and commodities markets, deal with the U.S. national debt, and establish a systemic risk monitor. The third G-20 Summit was held in Pittsburgh on September 24-25, 2009. On June 17, 2009, the Department of the Treasury presented the Obama Administration proposal for financial regulatory reform. The proposals focus on five areas (and proposed legislation) as indicated below. a. 4173 , The Wall Street Reform and Consumer Protection Act that addresses many of the issues raised by the financial crisis. Systemic Risk Regulator . Derivatives Regulation . 3126 would establish a Consumer Financial Protection Agency (CFPA). Four Phases of the Global Financial Crisis

The global financial crisis as it has played out in countries across the globe has been manifest in four overlapping phases. Nearly every industrialized country and many developing and emerging market countries have pursued some or all of these actions. 1424 / P.L. Coping with Macroeconomic Effects

The second phase of this financial crisis is less uncommon except that the severity of the macroeconomic downturn confronting countries around the world is the worst since the Great Depression of the 1930s. In order to coordinate reforms in national regulatory systems and give such proposals political backing, world leaders began a series of international meetings to address changes in policy, regulations, oversight, and enforcement. In this third phase, the immediate issues to be addressed by the United States and other nations center on "fixing the system" and preventing future crises from occurring. Dealing with Political, Social, and Security Effects65

The fourth phase of the financial crisis is in dealing with political, social, and security effects of the financial turmoil . On June 24, 2009. New Challenges and Policy in Managing Financial Risk83

		The Challenges

The actions of the United States and other nations in coping with the global financial crisis first aimed to contain the contagion, minimize losses to society, restore confidence in financial institutions and instruments, and lubricate the economic system in order for it to return to full operation. China's rebound has been particularly striking. Numerous sectors have been hard hit. This approach has been adopted by the Obama administration. December 1 . "We are not now interested in that." Emerging and developing economies. All profits came from the financial sector. Expropriation would be a last resort only. 111-5 . The U.S. House of Representatives passed the American Recovery and Reinvestment Act of 2009 ( H.R. January .
The world appears to be recovering from the global recession that has caused widespread business contraction, increases in unemployment, and shrinking government revenues. Although the industrialized economies have stopped contracting, for many, unemployment is still rising. The United States likely hit bottom in June 2009, but numerous small banks and households still face huge problems in restoring their balance sheets, and unemployment has combined with sub-prime loans to keep home foreclosures at a high rate. Nearly all industrialized countries and many emerging and developing nations avoided dropping into another "Great Depression" by implementing sizable economic stimulus and/or financial sector rescue packages, such as the American Recovery and Reinvestment Act of 2009 (P.L. 111-5). Several countries have resorted to borrowing from the International Monetary Fund as a last resort. The crisis has exposed fundamental weaknesses in financial systems worldwide, demonstrated how interconnected and interdependent economies are today, and has posed vexing policy dilemmas.
The process for coping with the crisis by countries across the globe has been manifest in four basic phases. The first has been intervention to contain the contagion and restore confidence in the system. The second has been coping with the secondary effects of the crisis, particularly the global recession and flight of capital from countries in emerging markets and elsewhere that have been affected by the crisis. The third phase of this process is to make changes in the financial system to reduce risk and prevent future crises. In order to give these proposals political backing, world leaders have called for international meetings to address changes in policy, regulations, oversight, and enforcement. On September 24-25, 2009, heads of the G-20 nations met in Pittsburgh to address the global financial crisis. The fourth phase of the process is dealing with political, social, and security effects of the financial turmoil. One such effect is the strengthened role of China in financial markets.
The role for Congress in this financial crisis is multifaceted. While the recent focus has been on combating the recession, the ultimate issue perhaps is how to ensure the smooth and efficient functioning of financial markets to promote the general well-being of the country while protecting taxpayer interests and facilitating business operations without creating a moral hazard. In addition to preventing future crises through legislative, oversight, and domestic regulatory functions, On June 17, 2009, the Obama Administration presented a proposal for financial regulatory reform that focuses on five areas and includes establishing the Federal Reserve as a systemic risk regulator, creating a Council of Regulators, regulating all financial derivatives, creating a Consumer Financial Protection Agency, improving coordination and oversight of international financial markets, and other provisions. The reform agenda now has moved to Congress with legislation that addresses many of the issues in the Obama plan but also includes other financial issues. Among the numerous bills in Congress addressing the financial crisis, H.R. 4173 (Wall Street Reform and Consumer Protection Act of 2009, passed the House on December 1, 2009) addresses many of the concerns raised. Congress also plays a role in measures to reform and recapitalize the International Monetary Fund, the World Bank, and regional development banks.
This report provides a historical account and analysis of the crisis through January 2010. For information on current aspects of the crisis, see other CRS reports. This report will not be updated.