As Congress begins the process of overhauling a “patchwork regulatory system that dates to the Civil War,” the Senate Banking Committee heard today from experts and interest group representatives on the best strategy for future regulation.

Senator Warner’s questioning focused on how the regulation we put in place today can safeguard future investors against the next-generation of potentially exotic financial products: 

"How do we prevent the current products or future products from being abused?   I’m all for innovation, but under the guise of financial innovation and financial engineering, we end up with people ending up way over their head.  Regulation and transparency alone may not solve the problem."

The panel concluded that while innovation is important to the financial system, the regulation should focus on preventing future financial products from exploiting loopholes in the system and lawmakers should be willing to expand regulatory authority as needed to prevent further risk to the global financial system. 

Senator Warner concluded that we need “nimble” regulation that includes both “rules” to mandate compliance, as well as “principles” to fill in the gaps so regulators will not need to pre-approve new financial products.  

He said to the panel of witnesses:

"We’re going to need your help in setting standards, not just retrospectively, but prospectively.  I just don’t want to be here five years later and say, 'Why didn’t we see that ahead of time?' so we don’t end up having to pre-clear everything beforehand."