September 28, 2007 (LPAC)--At a Congressional hearing yesterday on the malfeasance of ratings agencies, like Standard and Poor's, in hyping the mortgage securities bubble, Rep. Paul Kanjorski (D-PA) repeatedly noted that the mortgage securities blowout is now a "systemic financial crisis." It threatens American banks with failure like that of Britain's Northern Rock and other European banks, Kanjorski implied in a colloquy with witness Prof. Joseph Mason of Drexel University.

Opening the hearing of the Financial Services Committee's Subcommittee on Capital Markets, Kanjorski said, "These were unprecedented systemic failures by the ratings agencies, across entire classes of financial products; and I'm concerned now about potential systemic failures in the international financial system." In response, witness Shaun Mathis, of Miller Mathis investment bank, said that the mortgage bubble collapse was far from over: "Financial markets are in the greatest danger since the Great Depression. There is nothing small or self-limiting about this problem. There will be collapses" of investment firms and banks.

Representative Kanjorski then challenged the witnesses to say whether they could possibly disagree that we are now facing a systemic threat to financial markets and banks. And he specifically asked Prof. Mason, "You say that 10% of U.S. bank assets are based on structured investment vehicles (SIVs), specifically several trillion dollars in CDOs; can these banks survive the collapse of these CDOs? Do they have the capital base to survive that?" Mason answered, "No, and the FDIC does not have the resources to handle that event either."

Lyndon LaRouche responded: "Freeze, freeze, freeze! That's what you do in a bankruptcy: you freeze! You can't say the laws of the marketplace will control it, because the consequences would be inhuman."