Issue Position: Wall Street Reform

Issue Position

If we do not comprehensively reform Wall Street and its casino capitalism, no job is safe.

"We need financial institution reform to, frankly, protect Americans from bad capitalism."

-- Denny Heck, interview with The Daily News, January 6, 2010

The importance of the banking system, and especially community banks, in loaning money to small businesses on Main Street to create jobs is inarguable. A sound financial system is vital to our economic prosperity.

But it is no secret that the reckless practices of Wall Street contributed to the greatest economic recession since the Great Depression. Without reforming Wall Street, we will have the same system in place that caused the crisis and led to the loss of over seven million jobs. We can't let that happen again.

Wall Street reform will fix a broken system that allowed the big banks to game the system and take advantage of consumers with deceptive practices and marketing, protect taxpayers from future bailouts, hold greedy banks and reckless CEOs accountable, and restore confidence in the markets to make it easier for small businesses to get the credit they need to grow and create jobs.

Below are some key provisions that must be included in Wall Street reform:

- Congress should reinstate the Glass-Steagall Act, which separated commercial and investment banking for over six decades

The Glass Steagall Act was repealed in 1999 and allowed banks to become both commercial lenders and investment companies. This allowed big banks to become "too-big-to-fail," while using our federally-insured deposit money to make bets and take risks.

Banks should get back to the business of being banks, where our money is safe and being lent responsibly to small businesses and around our communities.

- Wall Street's derivative contracts must be forced out of the shadows and into public exchanges.

Derivatives are the risky bets, or hedges, whose value derives from a future event. Putting derivatives on a public exchange, like stocks, is the heart and soul of Wall Street reform because it requires traders to put up money to back their bets. It might be hard to believe but making bets with other people's money was, and continues to be, a common practice on Wall Street. Forcing these derivatives out of the shadows is essential to prevent banks from ever looking to taxpayers again when their bets go bad.

- We must enact strong consumer protections to prevent Wall Street from engaging in deceptive practices and marketing.

Reckless lending and deceptive practices increasingly dominated our financial products over the past years as Wall Street's demand for dangerous loans grew. Risky loans and deceptive fine print were profitable products for Wall Street. So they left safe lending practices behind and forced those of us on Main Street to choose from riskier financial products.

We need to enforce common sense rules that end deceptive practices like fine print gimmicks and require the banks and credit card companies to give consumers and small businesses better information about financial products like loans and credit cards so that they can make good decisions.

Additionally, Congress must ensure that any bank receiving taxpayer bailout TARP money pays back every cent.

We can absolutely get our economy moving again. But we must enact comprehensive Wall Street reform to get banks back on a level playing field, and credit flowing back to our small businesses.

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