Senate Banking Committee Chairman Chris Dodd (D-Conn.) said on Monday that high-speed automatic trading programs—which use mathematical models to buy and sell stocks in milliseconds—may have been responsible for the April 6 financial meltdown, when the market crashed nearly 1,000 points in just a few minutes.
While appearing on CBS‘ Face the Nation, Dodd indicated that the momentary crash is an example of Wall Street’s "casino environment" where "finance is getting detached from the real economy."
The senator noted that he and the Securities and Exchange Commission (SEC) will conduct hearings to determine the need for regulations designed to prevent sudden market crashes. He added that the financial overhaul bill currently being debated in Congress could help assist in that effort.
"We need to get in place our bill, have the president sign it, so we have the tools to protect our economy from these kinds of events," Dodd said.
Senator Richard Shelby (R-Ala.), a ranking member of the Senate Banking Committee, said on the same program that "technology has gotten ahead of the regulators," and that safeguards need to be put in place to prevent similar events from occurring.