More than a year after the onset of the financial crisis, three things are apparent: Congress has not passed any financial reform legislation (except for credit card rules); the more time passes, the more Wall Street objects to the prospect of any meaningful controls of its operations; and the legislation that has so far progressed in Congress is not commensurate with the scale of the crisis Wall Street caused.
Today, Sen. Chris Dodd (D-Conn.) kick starts the regulatory reform process in the Senate. We are particularly pleased that he has proposed a strong Consumer Financial Protection Agency (CFPA), with powers to monitor practices of small banks and a strong role for states to go beyond the federal regulatory floor to protect their citizens. A strong CFPA would have protected consumers from the predatory loans and abusive practices of the past decade – and, thereby, lessened the severity of the financial crisis.
We look forward to working with Chairman Dodd and members of the Senate to adopt the strong regulations needed to rein in Wall Street abuses. We know, of course, that Wall Street and the big banks will leverage their enormous power in an effort to remove any meaningful controls on their operations. Public Citizen will work with Sen. Dodd and any senator or representative who aims to resist those pressures. Some in Congress may believe that public anger over Wall Street has dissipated and therefore they will not be held accountable for siding with Wall Street in regulatory disputes. They are mistaken and risk facing a rude surprise in November 2010.
On the other hand, there are political rewards waiting for those who respond to the ongoing public outrage over the bailout with meaningful restraints on Wall Street. It’s time to break up the big banks, clamp down on the Wall Street bonus culture – including by imposing a windfall tax on the $140 billion in bonuses and compensation that Wall Street aims to pay in 2009 – and impose a speculation tax on stock and derivative trading. These and like measures are what the public wants – and they are what we need to prevent a recurrence of the financial meltdown.
Robert Weissman is president of Public Citizen.