Since that time, its principals and a Steering Committee, consisting of senior staff of the participating agencies, have met regularly. In a letter dated September 23, 1993, they requested the views of the Secretary of the Treasury on the status of the Working Group; its activities; and the adequacy of coordination among and contingency planning by, the federal financial regulatory agencies. We also reviewed 1998 and 1999 Steering Committee meeting agendas to determine the nature of the group’s biweekly meetings. The Working Group Addressed the Issues Specified in the Executive Order

In May 1988, the Working Group issued its market crash report, which generally responded to the issues that the President required the Working Group to consider in the executive order. The Working Group Has Responded to Various Market Events

The Working Group was established in response to a market event, and its subsequent activities focused on responding to market events. The Working Group Was Asked to Report on Y2K Preparedness

In May 1999, the Ranking Minority Member of the House Committee on Commerce asked the group to report on progress made on issues raised in our April 1999 report on Y2K  preparedness within the financial markets.In September 1999, the Working Group issued a response to this request.Specifically, the group outlined work completed on (1) coordination of actions and information among regulators and other organizations during the date change period; (2) promotion of additional Y2K readiness disclosure by foreign organizations; (3) development of strategies to communicate the readiness of the financial sector to alleviate the public’s concerns; and (4) identification of significant changes, if any, in the conditions reported in our April 1999 report. The Working Group Provides a Mechanism for Coordination and Cooperation

Agency officials involved with the Working Group generally described it as an informal mechanism that allows the free exchange of views and information on market events, proposed rulemaking or other regulatory action, and legislative developments. The Working Group Views Itself as an Informal Coordinating Mechanism

Although the Working Group is not based in statute and thus has no authority, agency officials involved with the Working Group view it as a useful mechanism that facilitates informal information sharing and coordination for various intermarket issues. Proposals to Provide Statutory Basis for the Working Group Raise Issues of Resources and Structure

Since 1994, various Members of Congress have raised questions about the Working Group’s ability to coordinate and function effectively. The issues were divided among (1) investor confidence, (2) the credit system, (3) market mechanisms, and (4) the regulatory structure. Most of the recommendations were to be carried out by the relevant agencies, primarily the Securities and Exchange Commission (SEC) and/or the Commodity Futures Trading Commission (CFTC) and the securities and futures exchanges they regulate. Although all of the issues have been considered, the action taken varies. 5. 6. Issue for consideration Credit system issues 7. 8. 9. 10. 12. 14. 15. 29.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on the role and functioning of the President's Working Group on Financial Markets, focusing on: (1) whether the issues listed for consideration by the Working Group in Executive Order 12631 have been considered; (2) what additional issues have been considered by the Working Group and how they were identified; and (3) the nature of coordination and cooperation within the Working Group and the views of members of Congress and Working Group participants about whether it needs to be formalized in statute.

What GAO Found

GAO noted that: (1) the Working Group and the relevant agencies have considered the issues articulated in the executive order concerning the 1987 market crash; (2) the 29 issues were divided among four categories: (a) investor confidence; (b) the credit system; (c) market mechanisms; and (d) the financial regulatory structure; (3) all of the issues were discussed in the Working Group's 1988 report on the market crash, or subsequently were addressed by the Securities and Exchange Commission, the Commodity Futures Trading Commission, or the exchanges they regulate; (4) the Working Group and the agencies have revised a few of its May 1988 recommendations, such as the 1998 revision of coordinated trading halts and expansion of their work on bankruptcy reform; (5) since 1994, the Working Group also has considered a variety of other financial issues; (6) most of its activities have resulted from self-initiated or congressionally requested work following some market event or issue; (7) the Working Group has drafted legislation aimed at reforming provisions of the Bankruptcy Code that apply to certain types of financial instruments; (8) the Working Group serves as an informal mechanism for coordination and cooperation among its members and their staffs; (9) according to the officials familiar with the Working Group, the frequency of its meetings usually is driven by market events; (10) the senior staffs of the agencies, who are responsible for carrying out the work of the Working Group (the Steering Committee), generally meet biweekly; (11) agency officials said that meetings of the Steering Committee are informal and generally have focused on agency perspectives, market events, agency actions, and financial legislation; (12) various members of Congress have raised questions about the Working Group's ability to coordinate and function effectively; (13) since 1994, various proposals have been made to provide a statutory basis for the Working Group; (14) although such proposals could enhance continuity, they also raise resource and structural issues; and (15) agency officials involved with the Working Group were generally averse to any formalization of the group and said that it functions as an informal coordinating body.