Restoring fiscal responsibility in government and trust in our financial system
I believe that many of the economic challenges we face today could have been avoided.
From subprime mortgages to hidden credit cards fees, the last decade has seen rules tilt too far in favor of banks and Wall Street at the expense of working men and women. Banking regulations adopted in the 1930s in response to the Great Depression were eased and an alternate banking system of investment banks, hedge funds, and insurers emerged outside the financial regulatory system. Traditional banks pushed for further deregulation, and in 1999 Congress repealed the Glass-Steagall Act, the Depression-era legislation that provided the foundation for 75 years of relative fiscal stability.
The financial crisis makes clear that we need to restore balance, accountability, transparency, and trust to our financial system. In our globally-interconnected financial system, the failure of one large financial institution can have a catastrophic impact on the world's economy. It's clear we need to strengthen oversight of markets and institutions.
I believe it's essential that we put in place a modern equivalent of Glass-Steagall that safeguards investors, protects consumers, and places more realistic limits on leverage. We need to ensure that the deposits and investments of working men and women aren't used to finance high-risk trades with unregulated financial instruments.
As a member of Congress I will push for a wide range of policy reforms that will help restore trust in our financial systems:
* Strengthen capital requirements: It's time to take a close look at the level of assets that financial institutions are required to keep on their balance sheets and to implement more balanced rules for the amount of leverage they are allowed to carry.
* End taxpayer bailouts: Taxpayers shouldn't be on the hook to rescue businesses that have become "too big to fail." I will work to ensure that we have a fair process for dealing with large financial institutions that are in danger of failing that ends bailouts, protects taxpayers, and safeguards the health of the rest of the financial system.
* Regulate derivatives, including credit default swaps: Derivatives have created huge risks to our economy far out of proportion to the value they provide. To reduce risk, improve transparency, prevent fraud, and protect investors, we need to create a market for over-the-counter derivatives, adopt robust margin requirements, and expand federal oversight for private investment firms that trade derivatives.
* Stop predatory mortgage practices: Legislation to end the kinds of predatory business practices that led to the subprime mortgage lending bubble is essential. Mortgage reform should start by requiring that lending institutions take clear steps to ensure that borrowers can afford to repay their loans.
* Ensure consumer protection: I will fight for a federal consumer protection agency that has oversight of credit cards, savings, and other consumer financial services. The agency should have the authority to prevent exorbitant interest rates; require financial information and disclosure in plain language; and define standards that make it easier for consumers to compare pricing.
* Access and fairness in lending and financial services: Too often, people in low-income communities lack access to the financial services they need. I will work to ensure that people in underserved communities can take advantage of lending, banking, and other financial services.
Along with financial deregulation that set the stage for the economic crisis, the 1980s also marked the beginning of an era of increasingly irresponsible fiscal policies. Federal debt as a percentage of the gross domestic product, which had been falling since the end of World War II, began to rise sharply in the 1980s as the Reagan Administration cut taxes and increased spending as the economy slowed. And while federal debt was brought under control under President Clinton, the Bush era saw a return to fiscal irresponsibility and rising government indebtedness.
After years of irresponsible fiscal policies, tax cuts, and spending increases, we face a major budgetary crisis. The fact is that we can't continue to amass the kinds of budget deficits that became the norm during the Bush Administration and are still growing.
In business, the impact of expenses and revenue on the bottom line are real and immediate. I know how important it is to balance near- and long-term priorities, and to take a clear-headed, pragmatic approach to tackling difficult financial issues.
To bring the national budget back under control, we'll have to return to a kind of fiscal transparency and responsibility that has been lacking in Washington, D.C. for too long:
* PAYGO: The first step to restoring fiscal responsibility in Congress is pay-as-you-go (PAYGO) budgetary practices that require all new government spending has to either be budget neutral or offset by finding equivalent savings through cuts in some other part of the budget. This is an essential step that will force Congress to exercise true fiscal discipline.
* Earmarks: Not all projects funded through earmarks are wasteful, but the process makes it too easy for our representatives in Congress to spend taxpayer money on pet projects and reward special interests. The earmark process is unfair, and recent steps to make it more transparent don't go far enough. Unless we can address these issues, I support a ban on earmarks.
* Balancing priorities: To ensure the long-term health of our economy, we'll need to engage in honest conversations about our priorities. Cutting taxes is easy for politicians, but we can't continue to eliminate taxes, maintain the existing level of services to our citizens, and pay for two wars. The key is to strike the right balance. With the right priorities, government can provide incentives and investments that support long-term growth and enable communities to prosper and government revenue to grow without increasing the tax burden on businesses or citizens.