Cantwell: Bill Allows Wall Street to Continue to Exploit Loopholes
Tonight U.S. Senator Maria Cantwell (D-WA) voted against the Senate version of a financial regulatory reform bill, saying it did not close potentially dangerous loopholes in the derivatives regulations. Unregulated derivatives, Cantwell said, played a key role in creating the worst financial crisis and economic downturn since the Great Depression. The economic meltdown began on Wall Street but hurt Main Street, costing our economy eight million jobs and cutting off investment capital. Cantwell supports complete transparency and oversight of the derivatives market. Even seemingly small loopholes can create structural flaws in the financial system that can cause tremendous damage in the long term as they are exploited by Wall Street.
"While this bill takes much needed steps to help prevent a crisis of this magnitude from ever happening again, it fails to close the very same loopholes in derivatives trading that led to the biggest economic implosion since the Great Depression," Senator Cantwell said. "Throughout this debate I have fought hard against efforts to weaken this legislation as well as to pass language to strengthen it further. But the fact of the matter is, without key reforms in derivatives trading, this bill does not safeguard America's economy from a repeat of this crisis.
It sets up a process for responding the next time we have a financial crisis, but it doesn't prevent this kind of thing from ever happening again. We have to stop these kinds of dangerous activities. We need stronger bans on banks gambling with depositors' money. We need bright lines -- like Glass-Steagall -- that separate risky activities from the traditional banking system. We need to refocus our financial system away from synthetic bets and get more capital into the hands of job creators and Main Street businesses. There are good, strong provisions in this bill, and I'm proud of the work we did to get them in there, but I fear that without closing the loopholes primarily responsible for this economic meltdown, we are missing the entire heart of the matter."
"I'm not giving up this fight. I intend to continue to work with my colleagues to strengthen the bill even further during the conference process, including taking language from an amendment I have offered with Senator Blanche Lincoln to close this loophole by tightening clearing requirements for trading derivatives. I believe that there is the will in both chambers to solve this challenge -- to tighten these critical loopholes and protect America's economy. We must reign in these dark markets and prevent our economy from being undermined by this dangerous loophole."
Cantwell coauthored two amendments that were not allowed to come up for debate and a vote in the Senate. Anamendmentshe coauthored with Sen. Blanche Lincoln (D-AR) would have tightened clearing requirements for trading derivatives by requiring that all standardized swaps be cleared; under this amendment, failure to do so makes the swap unlawful and could void the swap. Another amendment coauthored with Sen. John McCain, R-AZ would have re-established the Glass-Steagall separation of commercial and investment banking.
Throughout the debate, Cantwell has tirelessly fought to defeat efforts to weaken the legislation, and she has championed amendments that strengthen the bill, particularly in the areas of derivatives trading. Cantwell, a leader in the fight to prevent a repeat of the financial meltdown of 2008, and in previous years to end energy market manipulation, helped craft the tough derivatives language under consideration in the financial regulatory reform bill on the floor.
On May 17, the Senate passed an amendment co-sponsored by Cantwell that provides strong protections for investors while promoting small business startups vital to job creation.
On May 13, the Senate passed an amendment 61 to 38 submitted by Cantwell and Senator George LeMieux (R-FL) to remove the federal government's "seal of approval' from investment rating agencies and force federal regulators to develop more diverse and accurate measures of credit worthiness. Economists, regulators, and industry experts have agreed that an over-reliance on credit ratings contributed significantly to the recent economic crisis.
On May 6, the Senate unanimously passed Cantwell's anti-manipulation amendment, which makes it easier for the Commodities Futures Trading Commission (CFTC) to deter and enforce manipulation in futures and derivatives markets. Under current law, the standard the CFTC must meet to prove market manipulation is so high that there has only been one successful prosecution in the past 35 years.