WALL STREET REFORM
The 2008 Financial Crisis, or Great Recession, caused the loss of 8.8 million jobs and $19.2 trillion of household wealth.
From my perspective, while there are many reasons why the
financial crisis occurred, the truth of the matter is that Wall Street’s greed
led to the greatest economic crisis since the Great Depression and our
financial regulators and overall regulatory system let it happen. Why did we let banks engage in subprime
lending? Where were our regulators
protecting consumers from predatory lending practices? Why did no one put a stop to big banks
selling mortgage securities that were never examined and known to be
defective? The answer is greed.
At the urging of the Ohio Congressional Delegation, the House Committee on Financial Services held a hearing at Cleveland State University to examine some of the issues related to the foreclosure crisis and responses to it in the State of Ohio. You can review the hearing transcript here.
The response of Congress to the 2008 Financial Crisis has been completely inadequate. We should not have bailed out Wall Street’s megabanks. I voted against the bailout numerous times. The Dodd-Frank Wall Street Reform and Consumer Protection Act did not go far enough in addressing the root causes of the financial crisis. For example:
• It did not replace and strengthen Glass-Steagall, separating commercial banking from investing or speculation.
• It did not reform the credit rating agencies, which had a starring role in the misdirection of investors, including the fundamental business model of the credit rating agencies.
• It did not force every derivative to be traded openly and transparently on an exchange.
• It did not end too big too fail.
• It did not prevent Wall Street banks from replacing community banks.
• It did not encourage prudent lending.
• It did not strengthen support for those agencies finding and fighting fraud in our financial system.
• It did not properly address the housing crisis.
Going forward, first and foremost, we need to reinstate provisions of the Glass-Steagall Act which separated commercial banking from investment banking. There is no reason that our savings or checking account deposits should be used as leverage so Wall Street’s megabanks can engage in speculative trading. That’s why I introduced H.R. 129, the Return to Prudent Banking Act. The bill would reinstate Glass-Steagall and includes requirements that individuals cannot game the system by working for both a commercial depository bank and investment bank.
We also need to make sure that those who engaged in illegal activity that contributed to the Great Recession be brought to justice. If Wall Street executives knew that they would face stiff prison sentences if they engaged in an inappropriate manner then I believe they would not engage in activities such as predatory lending. Right now, the largest obstacle to ensuring that happens is there are not enough cops being on the beat to watch over Wall Street’s activities.
During the Savings and Loan crisis of the 1980s, the Federal Bureau of Investigation (FBI) established a series of strike forces based in 27 cities staffed with 1,000 agents and forensic experts, and dozens of prosecutors. Today’s FBI does not have the personnel to devote that many agents to investigate financial crimes but it should. Consequently, I have introduced H.R. 131, the Financial Crisis Criminal Investigation Act. The bill is simple; it authorizes the hiring of 1,000 FBI agents and a sufficient number of forensic experts to investigate financial crimes. Given the scale of the current financial crisis, we should at least meet the staffing level provided during previous financial crises.
Reinstating Glass-Steagall and hiring the appropriate number of FBI agents would provide a good start to addressing the root causes of the 2008 Financial Crisis. However, more need to be done. I have introduced additional legislation designed to protect consumers from Wall Street’s greed and reform our financial regulatory systems.
LEGISLATION I HAVE SPONSORED IN THE 113TH CONGRESS
H.R. 130, Democratizing the Federal Reserve System Act -- The bill cuts the time of service for a member of the Federal Reserve's Board of Governors from 14 to 7 years. Furthermore, it increases the post-service restriction on board members, barring them from holding any office, position, or employment in any member bank from 2 to 4 years after their service. Lastly, it changes the Full Open Market Committee voting structure to include each of the 7 members of the Federal Reserve Board of Governors and 6 of the 12 Federal Reserve Banks one year, and the other 6 in the following year. This democratizes the committee that sets interest rates.
H.R. 189, the Transparency and Security in Mortgage Registration Act – This bill prohibits Fannie Mae, Freddie Mac, and Ginnie Mae from owning or guaranteeing any mortgage that is assigned to the Mortgage Electronic Registration System (MERS), which was created by the banking industry to avoid paying registration fees at a county recorder’s office when interests in a mortgage change hands.
H.R. 190, the Produce the Note Act -- This bill prohibits foreclosure proceedings unless the person commencing the foreclosure complies with specified prerequisites, including identification of the actual holder of the mortgage note and the originating mortgage lender, as well as other items. In addition, this bill requires the person commencing the foreclosure to notify the mortgagor, in writing, not less than five days before any action is taken to commence foreclosure.
H.R. 234, the Fannie Mae and Freddie Mac Investigative Commission Act -- This bill establishes the Fannie Mae and Freddie Mac Investigative Commission to investigate and make recommendations to Congress regarding the actions of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) that led to their financial instability and federal conservatorship.