Op-Ed: Bill Regulating Wall Street Needs To Be Passed By Senate

Op-Ed

Millions of Americans are still feeling the ill effects of the financial meltdown of 2008.

The values of our retirement accounts and homes are still down and unemployment remains unacceptably high. Yet a year and a half later, there is still no plan in place to protect our economy from another meltdown. The Senate has yet to act on a House-passed provision I authored to force Wall Street institutions to pay back taxpayers for the bailout that kept their sector afloat. This is unacceptable.

Washington must stop delaying and act to protect our economy, protect consumers, force Wall Street banks to repay the bailout and stop taxpayer bailouts from being allowed again.

During the last decade, many giant investment banks began increasing the amount of risk they were taking through investing in complex derivatives products that only a handful of experts claimed to understand, and through the increased use of excessive leverage (i.e.,betting money they didn't have). When times were good these banks made enormous profits and paid huge bonuses, but when the housing market crashed and many of these investments turned out to be worthless, they no longer had the capital to withstand their losses, and their failures impacted our entire economy.

Last December, the House of Representatives passed the Wall Street Reform and Consumer Protection Act (H.R. 4173), which would ensure an end to taxpayer bailouts and finally provide oversight of the risk posed by "too big to fail" financial firms. Firms whose reckless risk threatened the larger economy would be required to take steps to reduce that risk. And rather than taxpayers bailing out failing firms like AIG, these institutions would be responsibly dissolved using a safety fund paid for by large banks themselves, the same way the FDIC now unwinds failed banks.

While stopping future bailouts, I believe we must also ensure taxpayers get paid back for every penny of the bailout initiated at the end of the Bush Administration shortly before I came to Congress. I wrote a measure that was added to H.R. 4173 that would require large institutions across the financial sector to pay the cost of any shortfall in the TARP program so taxpayers would be repaid every cent of the bailout.

H.R. 4173 also reforms executive compensation schemes and bonuses at large financial institutions by taking steps to make management pay decisions more transparent and require increased disclosure to shareholders describing how pay schemes are structured and how they align with the long term interest of investors. The law would also give shareholders an opportunity to approve compensation schemes during the annual shareholder meeting.

Finally, the Act creates strong protections to help stop consumers from getting ripped off. Credit card users or those with a student or car loan would be protected from losing billions of dollars per year from deceptive lending practices.

And entities like mortgage brokers and payday lenders would have to play by the same rules that community banks, credit unions, and other responsible lenders are required to follow.

Cutting back on reckless risk taking, protecting consumers, making banks pay back the bailout and eliminating the possibility of future taxpayer funded bailouts will protect our economy from the failures that led to the current financial crisis. These types of common sense reforms are building blocks upon which a stronger economy can be built. The Senate must act now on Wall Street reform legislation.

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