Banking Reform
12.07.2009
Here in Ohio, people are hurting like they haven’t hurt since the great depression of the 1930’s. Over the course of my campaign, I have listened to heart-wrenching stories about families facing financial ruin who have lost their health insurance and now cannot afford to pay medical bills for their children’s special health needs. And I have seen small business owners struggling—and in some cases having to shut their doors completely, because they cannot get credit to keep their businesses going (even when they have purchase orders in hand). Meanwhile, Wall Street and the nation's large financial institutions are picking up right where they left off as if the biggest taxpayer funded bailout of our country’s history was just a “blip” on the radar screen. I’ve got news for them: The party’s over.
Instituting financial reform that will protect workers, borrowers and taxpayers against irresponsible corporate behavior. Examples include credit card and student loan reform, such as a rate cap for bank-issued credit cards. I also will encourage loans and investments into small businesses and push for long overdue regulation of mortgage companies and banks.
There has been no real improvement in the regulation of banks and financial institutions, whose precarious practices have been allowed to continue with government blessing and even subsidy. The work of reforming our financial and banking regulations will be difficult, controversial and essential to avoid further catastrophe and to reduce the country's burgeoning deficit.
Regulation of our financial systems that is fair to both consumers and investors will add to overall economic improvement. This must begin with the reinstatement of the Glass Steagall Act that was repealed in 1998. The Glass Steagall prohibited a bank holding company from owning other financial companies, thus preventing banks from engaging in risky securities activities such as mortgage-backed securities and collateralized debt obligations.
Senators Barbara Boxer of California and Jim Webb of Virginia have introduced legislation that would impose a 50-percent fee on executive bonuses of more than $400,000 from companies that received more than $5 billion from the government's Troubled Asset Relief Fund in 2009. The Boxer-Webb legislation would likely raise more than $10 billion for the U.S. Treasury—all of which would go into a fund for new low-interest, guaranteed direct loans to small businesses needing credit. While that’s a start to recoup taxpayer money, we can do more to get to the heart of the problem, and end Wall Street’s partying on our dime.
President Obama proposed levying an assessment on banks with assets of $50 billion or more based on the risk of their investments, similar to the risk basis to determine premiums for insurance policies. This would affect about 50 banks by requiring a fee of 0.15 percent on the liabilities of these institutions, excluding any insured deposits. This proposal—a tax on the risks banks take, is a direct way to “incentivize” banks to reform their practices. The fee would raise $90 billion over 10 years, paying taxpayers back and discouraging large banks from taking on non-deposit liabilities involving excessive risk.
Even though Canada has just five banking groups, these banks did not prove to be “too big to fail.” Canadian regulations limit the extent to which banks can take on risk. American banks, however have taken on nearly unabated risk because of Reagan-era deregulation. Brought back from the brink of disaster by American taxpayers, American financial institutions that received TARP bailout funds have chafed under even minimal regulation, some actually borrowing to repay TARP funds—all in time to award executive compensation bonuses.
Congressional House legislation awaits Senate passage to create a Canada-like Consumer Financial Protection Agency, to establish limits on leveraging, and to limit securitization of loans by requiring that lenders hold on to some of their loans. I support this legislation. Unfortunately, this bill is expected to languish in the U.S. Senate.
I’ll take the tough steps to sponsor legislation that regulates banks on things like mortgage securitization and derivatives and the slicing and dicing of “tranches” made up of pieces and parts of aggregated mortgages, grouped--and even wagered on by banks—by risk of default. I’ll fight against banks gambling on the American dream—our homes—for nothing more than a better return and for fatter bonuses that reward wagering with other people’s money.
But I won't stop there. I’ll introduce legislation that will make it illegal for any corporate PAC or corporate executive whose institution received federal bailout dollars from contributing to federal candidates. People who are on the receiving end of government funded corporate aid should not be rewarding those who vote to give them the money.
The free market is a wonderful phenomenon and characteristic of the freedom we enjoy in our treasured democracy. But Government must act as the force for equity when the forces of the market produce results not consistent with the principles of freedom on which our government was founded two centuries ago.
These days, transparency and accountability are key for confidence in our government and the many systems of our economy. This transparency and accountability need to be ensured in the oversight of the stimulus funding that is distributed throughout the nation, and now that we have the Internet, individual citizens can take advantage of learning about our government's activities and oversight.
Needed equity such as caps on consumer credit card fees will allow our citizens to change their habits of spending more than they make and financial juggling that keeps them just steps away from bankruptcy.
It will be essential that candidates for the U.S. Senate "walk the talk" when it comes to reforming financial institutions. Many rail against 'Wall Street,' yet they take Wall Street's money anyway. DSCC Chair Bob Menendez has even been reported on as making the pilgrimage to Wall Street financial institutions and telling them to watch members of the Senate¹s actions and ignore their rhetoric. This is the kind of political dishonesty that Americans abhor. I am the only candidate in the race between the Democratic and Republican parties who can say I won't owe any favors to the banks that took TARP funds in the aftermath of the 'too big to fail" bank bailout of late 2008 and early 2009.
Please read my blog posts and press releases on reforming the financial system:
U.S. Sen. Candidate Brunner Supports Student Loan Reform Legislation Efforts in Congress
U.S. Sen. Candidate Brunner Urges Congress to Reject IMF Bailout
U.S. Sen. Candidate Brunner Calls on Congress to Aid Shuttered Dealerships
Senate Candidate Brunner Calls for More Reform in the Credit Card Industry
Updated: April 13th, 2010
