Speaking shortly after the Federal Open Market Committee's announcement that interest rates will be held at 2.00%, U.S. Senate Banking Committee Chairman Christopher Dodd said the economic crisis is likely to continue to get worse.
"The economic crisis that we're in the midst of is deepening and it is going to be with us for some time," he told reporters.
Commenting on the current credit crisis and the uncertainty surrounding insurance firm AIG, Dodd said he is "skeptical" of possible intervention for AIG, when Lehman Brothers did not receive such support and collapsed as a result.
He said the recent events in the financial market are "not a natural disaster" and that much of the crisis could have been avoided. Dodd said signs of the impending crisis had been around for years but that nobody heeded the warnings.
Dodd also said the government should consider a second stimulus package and that he likes the idea of creating an agency similar to the Resolution Trust Corporation.
Dodd announced Fed Chairman Ben Bernanke and Federal Housing Finance Agency Director James Lockhart will testify at a banking committee hearing on Thursday. Bernanke and SEC chairman Christopher Cox are now scheduled to testify on Sept. 23.
In an interview with Bloomberg television just moments earlier, U.S. Senator Shelby said he was against any government intervention for AiG, or Lehman Brothers. "We should not bail out everyone," the policy-maker said, adding that during market corrections, people get hurt.
He also said he had spoken with U.S. Treasury Secretary Paulson on Tuesday, and that he was not happy with the outcome of the talk. Shelby added that the situation remained dire in the U.S real estate market.
By Stephen Huebl and edited by Sarah Sussman
©CEP News Ltd. 2008