Finally, a Democratic senator stood up and outlined the necessary financial reform that the Obama administration has yet to initiate. For over a year, President Obama and his economic/financial team—Geithner, Bernanke and Summers have overseen the largest transfer of public wealth to private hands in history. The actual amount of this transfer to date is unknown, but as of late last year, Naomi Prins, in her book It Takes a Pillage: Behind the Bailouts, Bonuses, and Backroom Deals from Washington to Wall Street, puts it at around $14.4 trillion.
But, for some reason, the Obama administration has not been in a hurry to reign in the very people and practices that brought our economy to its knees, and drained our public coffers of money needed for health care, jobs, infrastructure repair, education, and energy innovation. Unfortunately, President Obama has chosen to give speeches to Wall Street, and tinker around the edges, leaving the financial practices in place that will inevitably cause another crisis.
But, the good news is that on March 11, Senator Ted Kaufman (D-DEL) gave a speech on the senate floor, outlining strong measures for stopping the financial abuses of Wall Street. His main points were:
- Excessive deregulation allowed big finance to get out of control from the 1980s – but particularly during and after the 1990s. This led directly to the economic catastrophe in 2007-08.
- We need to modernize and apply the same general principles that were behind the Glass-Steagall Banking Act of 1933, i.e., separating “boring” but essential commercial banking (running payments, offering deposits-with-insurance, etc.) from “risky” other forms of financial activity.
- We need size caps on the biggest banks in our financial system, preferably as a percent of GDP.
- We should tighten capital requirements substantially.
- And we must regulate derivatives more tightly.
I find it puzzling that this speech wasn’t given by President Obama a year ago, and that none of these common sense reforms have been encouraged by his administration.