Voice of the People: We Need Stronger Restrictions On Wall Street

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Voice of the People by James J. Devine
Former Federal Reserve chairman Paul Volcker, Oregon U.S. Sen. Jeff Merkley and Michigan U.S. Sen. Carl Levin are American heroes who won a long battle to severely restrict the risky trading activities among banks protected by such government guarantees as deposit insurance and access to emergency loans.
Three and half years have passed, but some of the restrictions on banks that prevented a financial meltdown from the time of the Great Depression until a few years after they were repealed are finally becoming a reality once again.
In a statement, Volcker hailed the move, saying it has “put in place one significant part of the larger ongoing effort to rebuild a strong banking system fully capable of, and attentive to, meeting the critical financial needs of businesses and individuals.”
The so-called Volcker Rule embodies commons sense regulation that big banks like JPMorgan Chase, Bank of America, and Goldman Sachs will have to abide by.
For example, greedy Wall Street titans can no longer recklessly gamble with other people’s money when it is believed to be invested in smart, safe and secure assets.
As Volcker explained, “If you are going to be a commercial bank, with all the protections that implies, you shouldn’t be doing this stuff. If you are doing this stuff, you shouldn’t be a commercial bank.”
In a joint statement, Merkley and Levin hailed the new seventy-one-page rule adopted by the Securities and Exchange Commission, the Fed, and three other agencies, as a victory for the provision they inserted into “the Dodd-Frank Act in order to put a strong firewall between banks and hedge-fund-style high-risk trading.”
While that is the good news, the bad news is that there remains plenty of really bad news.
The latest restrictions are not going to be the end of institutions that are too-big-to-fail.
There are exemptions for hedging, or placing huge bets on bond markets, as well as market-making, credit derivatives and other scams that few of us understand.
By July, 2015, each bank’s C.E.O. will have to publicly attest that a system is in place “designed to achieve compliance” but that language represents giant loophole, compared with forcing banksters to swear that they are actually “in compliance.”
Despite what some on Wall Street and in Washington may say, this work is not finished.
Working people should be going all in on getting even more ambitious financial reform and we should be voting for candidates who promise to demand reparations for the millions of homeowners who lost half their property values because of corporate greed and lawlessness among the richest people in the world.
These guys just crashed the world economy and we’re only going to ban some of their most outrageous practices instead of pushing for stronger restrictions on Wall Street.
Both Democrats and Republicans who blame the 2008 financial crisis on deregulation have expressed concern that the Volcker rule that the five U.S. agencies adopted after more than three years of Wall Street resistance won’t adequately block banks from making risky bets.
“Philosophically, what we would like to see is the return to Glass-Steagall,” said Bartlett Naylor, a lobbyist for Public Citizen. “When it came to Dodd-Frank, the closest we got was this.”
Glass-Steagall is the common term for provisions of the 1933 Banking Act that barred commercial banks from owning affiliates that underwrite and trade securities.
The law included other measures to restore faith in the Depression-shattered banking system, including founding the FDIC to protect customers’ savings in the event of a bank failure.
Deregulation of the financial industry in the 1990s caused the 2008 crisis, so Senator Elizabeth Warren, a Massachusetts Democrat, and Senator John McCain, an Arizona Republican, proposed remedies in one measure named the “21st Century Glass-Steagall Act,” which aims to separate “traditional banks from riskier financial services.”
“We should not accept a financial system that allows the biggest banks to emerge from a crisis in record-setting shape while ordinary Americans continue to struggle,” Warren said in a September speech marking the fifth anniversary of the turmoil. “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.”
Sanford “Sandy” Weill, whose creation of Citigroup Inc. ushered in the era of U.S. bank conglomerates in the 1990s, has said ending Glass-Steagall’s prohibitions was a mistake. He was right, but for some reason America has yet to restore the firewall that kept us safe for 65 years.
Tinkering with the fringes of a broken financial system, failing to address the corruption of our political system, and leaving billions of working people around the world open to victimization by greedy rich people is an alarming indictment of our democracy.
Power is currently in the hands of the people and we will be damned by future generations if we do not use it before it is too late.


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