Wall Street's unexplained plunge last week and Greece's debt problems posed systemic risks and underscored the need for financial regulatory overhaul, a top U.S. lawmaker said on Sunday.
Senate Banking Committee Chairman Chris Dodd told CBS's Face of the Nation program that authorities had not yet figured out the events of last Thursday, which saw the Dow Jones industrial average tumble nearly 1,000 points.
We need some answers pretty soon. This is an issue that raises systemic risk. The problems in Europe raise system risk, Dodd said. We need to get in place a bill, have the president sign it so that we have tools to protect our economy from these kinds of events.
Market participants have speculated high-frequency and algorithmic trading magnified the wild swing. The debt problems in Greece have raised fears of contagion to other nations in the euro area with budget problems.
These fears overshadowed a string of robust U.S. economic data, including a 290,000 gain in nonfarm payrolls in April.
What you're getting is finance is getting detached from the real economy. You are getting some of this casino environment that is appearing in our markets. It does not reflect what is going on in the real economy, Dodd said.
Clearly the Securities and Exchange Commission needs to act, they need to step up very quickly and let us know what happened here and what steps need to be taken. I don't think you need legislation in this area. You need the regulators to step up.
(Reporting by Lucia Mutikani; Editing by Maureen Bavdek)