[What Government Can Do To Protect the Public Interest in a Changing Financial Market Place]

GAO discussed what the federal government could do to protect the public interest in a changing financial market. GAO noted that the federal government's policy goals were to: (1) ensure financial soundness of institutions such as the banking systems, securities firms, stock exchanges, and clearing corporations; (2) maintain market liquidity throughout the commodities trading system; and (3) protect consumers from inappropriate risk-taking situations. GAO also found that the federal government could: (1) define legal relationships such as fiduciary responsibilities and trading activities; (2) require that certain trading takes place in public markets; (3) define a regulatory structure for supervision of individual firms; and (4) take special program initiatives such as improving supervisory activities. In addition, GAO found that it was difficult to achieve policy objectives due to: (1) U.S. and international politics; (2) limited information on international trading markets; (3) limitations on regulatory agencies' ability to accomplish objectives; (4) lack of international financial coordination; and (5) uncertainity as to whether financial institutions or the public should bear the risks. GAO believes that the federal government should create an economic environment that encourages more stable markets.