The financial reform bill in its final stages of legislative action did not break up the big banks, re-instate Glass-Steagall, reign in bonuses and executive salaries, stop the usury rates for pay day loans and credit cards, nor did it require re-making of mortgages in light of the housing collapse, but there are still some key issues worth fighting for – issues the big banks and, too often, the Obama administration, are trying to remove from the bill.
Right now the conference committee is holding behind closed door negotiations where bank lobbyists through big bank friendly lawmakers are trying to strip key reforms from the bill. There are three key issues we should be urging legislators to support:
1. Stop Taxpayer Subsidies for Risky Derivatives: Sec. 716 of the Senate bill contains a ban on federal government assistance to any swap entity involved in the risky derivatives market. The derivatives market worth hundreds of trillions of dollars is conducted with no transparency and was a root cause of the financial collapse. Sec. 716 will require the five largest banks/swaps dealers (Goldman Sachs, Morgan Stanley, JP Morgan Chase, Citigroup and Bank of America responsible for 90% of the swaps and derivatives markets) to spin off their swaps desks into a separately capitalized affiliate. It is critical to separate the casino derivatives market from old fashioned banking because it is risky and these banks are so big that if they fail the taxpayers will be forced, once again, to bail the out or suffer a collapse of the economy. Sec. 716 is designed toward preventing a situation in which taxpayers would once again be liable for the risky bad bets of big banks. Sec. 716 would ensure that private sector institutions alone are responsible for these risky trades.
2. Sufficient Capital for Bets – Rep. Susan Collins was able to get included an amendment that required banks to hold sufficient capital for their risky investments. Legislators should be urged to take the strongest measures from the House and Senate versions of the bill. Unfortunately, the Obama administration through officials in the Treasury Department, along with the Federal Reserve and Wall Street banksters are working to kill the Collins Amendment even though it was adopted unanimously. The amendment, supported by Sheila Bair co-chair of the FDIC, would force big U.S. banks with more than $250 billion in assets to meet higher capital requirements when they are engaging in risky activities like derivatives, financial guarantees and repurchase agreements, i.e. the types of activities that caused the economic collapse.
3. Independent Consumer Agency – Perhaps the most hopeful proposal from President Obama was the creation of an independent consumer agency. This would create a focused watchdog to stop obvious bank abuses by giving consumers somewhere to go to challenge subprime mortgages, abusive and arbitrary rate hikes on your credit card, payday loans and hidden bank fees.
Unfortunately, the agency has been put in the Federal Reserve which is primarily concerned about keeping the banking system stable. And, amendments have passed that weaken the agency further, e.g. Rep. Brad Miller (D-N.C.) sponsored an amendment exempting 8,000 of the nation’s 8,200 banks from the CFPA’s oversight. Another requires the director of the agency to take input from other regulators whose focus is protecting the banks not consumers. These amendments can be removed so consumers have an advocate who can protect us from banking abuses.
Prosperity Agenda is joining with other organizations like A New Way Forward and BanksterUSA to urge legislators to strengthen the final bill. The top targets of our attention are Senate Banking Chair, Chris Dodd (D-CT), House Financial Services Chair Barney Frank, Sen. Charles Schumer (D-N) and Sen. Judd Gregg (R-NH). For a full list of the members of the conference committee and where they stand and their phone numbers click here.
There is no question that the concentrated corporate power of Wall Street is working to weaken the already disappointing financial reform bill. There is only one antidote to their power and that is our power. To be effective conscious citizens must be organized, active and persistent. Please call today and let your legislators know you want real reform. Time is running out – call now.
KEVIN ZEESE is executive director of ProsperityAgenda.US.