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Senate Protections for Wall Street Bankers Are Misguided

Nov. 13, 2018

Senate Protections for Wall Street Bankers Are Misguided

Statement of Bartlett Naylor, Financial Policy Advocate, Public Citizen’s Congress Watch Division

Note: Today, the U.S. Senate Judiciary Committee will hold a hearing titled, “Big Bank Bankruptcy: Ten Years After Lehman Brothers.

Ordinarily, we should welcome a hearing organized by Republicans that might examine the fraud, mismanagement and malfeasance that 10 years ago led to the Lehman disaster, the largest bankruptcy in U.S. history. But this hearing appears designed to promote misguided bankruptcy legislation that protects the very managers who steered Wall Street banks into a ditch during the financial crisis.

The legislation to be discussed in this hearing, approved last year in the U.S. House of Representatives as H.R. 1667, would empower bankers to decide when to declare bankruptcy. It would let a single bankruptcy judge – instead of federal regulators – oversee the liquidation of failing megabanks and allow bankers to “gamble for resurrection,” where they could double down on the same failed practices that led to insolvency.

Lehman’s bankruptcy sparked contagion and revealed vast infirmities throughout the financial sector. In the end, millions of Americans lost their homes, jobs and savings. Americans are fed up with being held hostage to banks that are too big to fail. This legislation should be opposed.