Our nation is starting to come up from the depths of the worst recession since the Great Depression. Over the past year, this Congress and President Obama have made the tough choices and taken effective steps using the Stimulus and other measures to bring our economy back from the brink of disaster.
But there is more work to be done. Later this week, the House will consider The Wall Street Reform and Consumer Protections Act to address the systematic failures that precipitated the crisis.
After almost two years of recession, Wall Street is beginning to show signs of recovery. Yet few outside the “Big Apple” have experienced relief, and the regulatory system that enabled the crises remains unchanged.
In the years leading up to the upheaval, America’s financial regulatory regime took on an excessive build-up of risk, both inside and outside the traditional banking system. The shock absorbers critical to preserving stability – capital, margin, and liquidity cushions in particular -were vastly inadequate. Wall Street firms were free to take huge risks with borrowed funds and little of their own capital at stake, funding long-term, illiquid assets with cheap, short-term debt. Over time, this risky behavior migrated from the regulated and partially regulated parts of our financial system to the almost entirely unregulated parts, making it difficult for the government to control or even gauge its extent.
Later this week, Congress will take steps to stop this type of behavior once and for all. The Wall Street Reform and Consumer Products Act seeks to fix the current regulatory system, protecting Main Street from suffering the consequences of Wall Street’s egregious activities. The legislation includes measures requiring uniform regulation and supervision of all Wall Street firms, no matter their size. It installs regulatory accountability in the form of an independent Consumer Financial Protection Agency (CFPA) focused solely on consumers needs. It would ensure that the financial system as a whole is more capable of absorbing shocks and coping with failures by increasing the amount of capital and liquid assets banks must hold. The legislation would further erase the dangerous notion of an institution being “too big to fail.” As President Obama recently affirmed, “those on Wall Street cannot resume taking risks without regard for consequences and expect that next time, American taxpayers will be there to break their fall.”
By putting in place financial reforms that prioritize consistency and accountability, empower regulators to hold Wall Street firms accountable, raise standards and give the government the tools it needs to prevent further crises, Congress can prevent a similarly dire situation from occurring in the future. This legislation has my full support and I look forward to seeing it become law.
Rep. James Moran (D) is Virginia’s 8th Congressional District Representative in the U.S. House of Representatives.