Nel's New Day

November 14, 2013

Listen to Elizabeth Warren

Filed under: Uncategorized — trp2011 @ 10:18 PM
Tags: , , , ,

While the media and the GOP manage to keep focus in the United States firmly focused on the Affordable Health Care, Sen. Elizabeth Warren (D-MA) spoke Tuesday about the danger of big banks. People in this country need to know that the oncoming disaster is not Obamacare. It’s our financial problems.

“Who would have thought five years ago, after we witnessed firsthand the dangers of an overly concentrated financial system, that the ‘too big to fail’ problem would only have gotten worse?” Warren said. Her indictment was not only of financial institutions that “have fought to delay and hamstring the implementation of financial reform,” after “exploiting consumers, larding their books with excessive risk, and making bad bets” but also of the regulators and lawmakers—many from her own party—who are refusing to hold the financial sector to account.

The four largest banks are now 30 percent larger than they were five years ago when the crisis began. More than half of the nation’s banking assets are held by just five banks. Yet regulators have failed to set the rules, and agencies responsible for implementing the reforms outlined in Dodd-Frank have missed more than 60 percent of their deadlines. Fewer than half of the regulations mandated under the law have been finalized, and more than quarter have not even been written. At the same time, regulators met with big banks 2,118 times since Dodd-Frank passed, fourteen times as many meetings as with advocates of financial reform.

“Since when does Congress set deadlines, watch regulators miss most of them, and then take that failure as a reason not to act?” Warren asked. “I thought that if the regulators failed, it was time for Congress to step in. That’s what oversight means.” Lawmakers are intent to dismantle financial reform legislation. In July, several Wall Street–friendly Democrats urged the Commodity Futures Trading Commission to delay rules for American banks engaged in derivatives trading overseas, a practice that has been unregulated. Last month, the House passed two bills, one written by Citigroup lobbyists, delaying provisions in Dodd-Frank by a bipartisan vote. Those two votes bring the total of recent bills passed by the House to undercut financial reform to ten.

In July, Warren and Sens. John McCain (R-AZ), Maria Cantwell (D-WA), and Angus King (I-ME) introduced a new version of the Glass-Steagall Act, which would force financial institutions to separate consumer banking activities like checking and savings deposits from risky practices such as credit swaps that brought the country down in 2008. The bill “would reduce failures of the big banks by making banking boring, protecting deposits, and providing stability to the system even in bad times,” Warren said. “Big banks would still be big—but not too big to fail or, for that matter, too big to manage, too big to regulate, too big for trial or too big for jail.”

The Consumer Financial Protection Bureau has met all of its deadlines, but Dodd-Frank has not changed the balance of power between financial giants and regulators. Other problems, such as shadow banking, exceed the scope of the legislation. A report provides many ways to limit risk and constrain mega-banks, but no one will enact them.

“Congress must act to protect our economy and prevent future crises,” Warren said. “What we need is a system…that recognizes we don’t grow this country from the financial sector; we grow this country from the middle class.” Legislators talk about the importance of the middle class, but their campaigns can’t profit from these people. They need donations from Wall Street and big business in their efforts to run for election. That was made obvious during the recent government shutdown when corporations made the GOP re-open government.

As Zoe Carpenter wrote, “People who determine policy and the institutions perpetuating the imbalances in the economy are locked in mutually beneficial relationship.”

According to Warren, the financial crisis cost people in the United States more than $14 trillion dollars, $120,000 for every household. “Where are we in making sure behemoth institutions on Wall Street can’t bring down the economy again? And make wild gambles that suck up all the profits in the good times? And stick the taxpayer with the bill when it goes wrong?” Warren asked.

“Three years since Dodd-Frank was passed, the biggest banks are bigger than ever, the risks to the system have grown and the market distortions continue.” Current regulators do not give “much reason for confidence,” she said. “It is time to act: the last thing we should do is wait for another crisis.”

In her speech at the Roosevelt Institute/Americans for Financial Reform conference, Warren explained the importance of her proposed bill:

“Big banks would once again have understandable balance sheets, and with that would come greater market discipline. Now sure, the lobbyists for Wall Street say the sky will fall if they can’t use deposits in checking accounts to fund their high-risk activities. But they said that in the 1930s, too. They were wrong then, and they are wrong now. The Glass-Steagall Act would restore the stability to the financial system that began to disappear in the 1980s and 1990s….

“We should not accept a financial system that allows the biggest banks to emerge from a crisis in record-setting shape while working Americans continue to struggle. And we should not accept a regulatory system that is so besieged by lobbyists for the big banks that it takes years to deliver rules and then the rules that are delivered are often watered-down and ineffective.

“What we need is a system that puts an end to the boom-and- bust cycle. A system that recognizes we don’t grow this country from the financial sector; we grow this country from the middle class.

“Powerful interests will fight to hang on to every benefit and subsidy they now enjoy. Even after exploiting consumers, larding their books with excessive risk, and making bad bets that brought down the economy and forced taxpayer bailouts, the big Wall Street banks are not chastened. They have fought to delay and hamstring the implementation of financial reform, and they will continue to fight every inch of the way.

“That’s the battlefield. That’s what were up against. But David beat Goliath with the establishment of CFPB and, just a few months ago, with the confirmation of Rich Cordray. David beat Goliath with the passage of Dodd-Frank. We did that together with Americans for Financial Reform, the Roosevelt Institute, and so many of you in this room. I am confident David can beat Goliath on Too Big to Fail. We just have to pick up the slingshot again.”

The original Glass–Steagall Act would have been 80 years old this year. After the severity of the Great Depression, the law was passed to limit the connection between commercial banks and securities firms. Weakened in the 1960s, the law was largely eviscerated in the 1980s when Alan Greenspan took over the Federal Reserve. The law’s death came in 1999 when two provisions removed the wall between banks and securities firms in the Gramm/Leach/Bliley Act. With no wall, Wall Street investment banking firms could legally gamble with depositors’ money, a factor that led to the 2008 recession.

As the House fails to go into session most of the time and the Senate plays with filibusters, financial institutions are again driving the country toward the cliff. Congress needs to make consequences for bank executive who lack integrity in their business dealings and then expect taxpayers to refinance them so that they can continue receiving their huge bonuses. Congress also needs to force huge banks to break up into smaller entities and prevent other mergers resulting in more big banks. And Congress needs to stop trying to destroy Dodd-Frank that guides the wind-down of failing financial institutions rather than giving them unlimited taxpayer bailouts.

It’s been 26 years since the stock market crash that fell 22.6 percent in one day. Another crash is eminent. Combining that with no responsibilities for banks and the huge difference between the wealthy and the rest of the people will bring disaster on the United States. It may all happen while the House continues to pass bills against Affordable Care Act and sets its trajectory toward shutting down the government and defaulting on the debt. We need to listen to Elizabeth Warren.


1 Comment »

  1. Wisdom. May it fall on heeding ears.


    Comment by Lee Lynch — November 15, 2013 @ 1:15 AM | Reply

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