The Wall Street Transparency & Accountability Act of 2010

[Guest August]

Let's start reviewing the language of the bill.

[Guest LAW]

Bill Summary

 

This is landmark reform legislation that will bring 100 percent transparency to an unregulated $600 trillion market, close all loopholes and keep jobs on Main Street. This will protect taxpayers, jobs, consumers and the global economy, and will go further than any other proposal to prevent future bailouts.

[Guest LAW]

Historic Reform of the Derivatives Market

 

Brings 100 Percent Transparency to Market with Real-Time Price Reporting:

 

Wall Street will no longer be able to make excessive profits by operating in the dark. Exposing these markets to the light of day will put this money where it belongs – on Main Street. The public will see what is being traded, who is doing the trading and, most importantly, regulators can go after fraud, manipulation and excessive speculation.

[Guest LAW]

Lowers Systemic Risk by Requiring Mandatory Trading and Clearing:

 

Trading and clearing of swaps lower risks and make the entire financial system safer. Transactions, determined by the regulator, will be required to clear through a clearinghouse. In addition, these transactions must be traded on a regulated exchange, which will provide further market transparency.

[Guest LAW]

Prevents Future Bailouts and Address "Too Big to Fail":

 

Banks need to be kept in the business of banking. The taxpayer funds used to bail out AIG and other Wall Street firms will never be used for this purpose again. The Federal Reserve and FDIC will be prohibited from providing any federal funds to bail out Wall Street firms who engage in risky derivative deals.

[Guest LAW]

Closes Loopholes:

 

Loopholes have allowed far too many to avoid the law of the land or set up shell companies to claim exemptions. This bill gives regulators the authority to close any loophole they find, protecting the markets, taxpayers and the economy.

[Guest LAW]

Protects Jobs on Main Street:

 

The interests of Main Street will be protected. Commercial businesses and manufacturers who use these markets and customized contracts to manage risk will still be permitted to do so without imposing additional margin costs. This will protect American jobs and keep consumer costs low.

[Guest LAW]

Protects Municipalities and Pensions:

 

Swaps dealers will have a “fiduciary duty,” just like investment advisers, that will require the interests of municipalities and pension retirement funds be put first; ensuring Wall Street doesn’t take advantage of Main Street and taxpayers.

[Guest LAW]

Regulates Foreign Exchange Transactions:

 

Foreign exchange swaps will be regulated like all other Wall Street contracts. At $60 trillion, this is the second largest component of the swaps market and must be regulated.

[Guest LAW]

Increases Enforcement Authority to Punish Bad Behavior:

 

Regulators will be given broad enforcement authority to punish bad actors that knowingly help clients defraud third parties or the public such as when Wall Street helped Greece use swaps to hide the true state of the country’s finances.

[Guest greenzen]

I think we all can come together with this topic.

[Guest Sato]

I don't believe it. Change is actually happening and the banks are going to fund it.

[Guest George]

Protects Municipalities and Pensions:

 

Swaps dealers will have a “fiduciary duty,” just like investment advisers, that will require the interests of municipalities and pension retirement funds be put first; ensuring Wall Street doesn’t take advantage of Main Street and taxpayers.

 

You know who else has "fiduciary duty?" Wall Street Banks. Do they exercise it? Not by a long shot.

I'll believe this legislation is effective when I see it, which will probably be sometime between "never" and "never-ever."

The Democrats need to grow a back-bone, or they'll be bullied (like they are now) for the rest of time.

[Guest GOP]

Republican Regulatory Reform Plan

 

Committee Republicans introduced comprehensive financial regulatory reform legislation. The Consumer Protection and Regulatory Enhancement Act (H.R. 3310) will protect investors, taxpayers, and consumers, and make Wall Street responsible for its actions. The Republican legislation addresses the causes of the financial crisis, and modernizes the regulatory structure while adopting a new approach to the financial markets, one that no longer includes the taxpayer as the financial backstop of the financial markets.

 

REPUBLICAN PRINCIPLES:

 

No More Bailouts. Ensuring taxpayers are never again asked to pick up the tab for bad bets on Wall Street while some creditors and counterparties of failed firms are made whole.

 

Ending the Government's Practice of Picking Winners and Losers. Insolvent firms will be permitted to fail rather then become wards of the state.

 

Restore Market Discipline. Financial firms must understand there will be consequences for imprudent business decisions.

 

SUMMARY OF THE REPUBLICAN PLAN:

 

Enhanced Bankruptcy. Republicans call for the resolution of insolvent non-bank institutions-no matter how large or systemically important-by creating a new chapter of the bankruptcy code to make it more efficient and better suited for resolving large non-bank financial institutions. This new chapter will facilitate coordination between regulators and the courts to ensure technical and specialized expertise is applied when dealing with these complex institutions. Bankruptcy judges would also have the power to stay claims by creditors and counterparties to prevent runs on troubled institutions.

 

Market Stability and Capital Adequacy Board. Under the Republican plan, this Board will not have independent enforcement or supervisory authority over individual firms but would be tasked with monitoring the interactions of various sectors of the financial system, and identifying risks that could endanger the stability and soundness of the system. In order to address current regulatory gaps, each functional regulator would be required to assess the effects of their regulated entities' activities on macroeconomic stability and review how entities under their regulatory purview interact with entities outside their purview. The Board will be chaired by the Secretary of the Treasury and comprised of outside experts as well as representatives from the financial regulatory agencies responsible for supervising large, complex firms.

 

Regulatory Restructuring. The Republican plan would ensure consistent enforcement, accountability and transparency by modernizing the current framework of overlapping and redundant Federal financial regulatory agencies and streamlining supervision of deposit-taking entities in one agency while preserving charter choice as well as the dual banking system. The plan combines the Office of the Comptroller of the Currency (OCC) and Office of Thrift Supervision (OTS) into one agency and shifts the supervisory functions of the Federal Reserve and Federal Deposit Insurance Corporation (FDIC) to that agency, including the responsibility for overseeing bank and financial holding companies.

 

Fundamental Reform of the Federal Reserve. The Republican plan would bring transparency and accountability by directing the Government Accountability Office to conduct extensive audits. The plan refocuses the Fed on its core mission of conducting monetary policy by relieving it of current regulatory and supervisory responsibilities and reassigning them to other agencies, and requiring an explicit inflation target. These changes will eliminate the Fed's current incentive to prop up the economy through an accommodative monetary policy to prevent firms from failing. The Republican Plan would impose limitations on the Fed's use of its authority under section 13(3) of the Federal Reserve Act to respond to "unusual and exigent" circumstances by subjecting actions under 13(3) to Treasury approval and giving Congress the ability to disapprove, placing 13(3) transactions on Treasury's balance sheet, and eliminating the use of this authority on behalf of specific institutions.

 

Government Sponsored Enterprise (GSE) Reform. The Republican plan would phase out taxpayer subsidies of Fannie Mae and Freddie Mac over a number of years and end the current model of privatized profits and socialized losses. It sunsets the current GSE conservatorship by a date certain, placing Fannie and Freddie in receivership if they are not financially viable at that time. If they are viable, once the housing market has stabilized, the plan would initiate the process of cutting their ties to the government by winding down the federal subsidies granted through their charters and transitioning Fannie and Freddie into non-government backed entities that compete on a level playing field with other private firms. In making reforms, Republicans will address reducing Fannie and Freddie's portfolios, re-focusing Fannie and Freddie on promoting housing affordability, and requiring SEC registration and the payment of taxes.

 

Credit Rating Agency Reform. The Republican plan changes the definition of the Nationally Recognized Statistical Ratings Organization to "nationally registered statistical rating organizations" and removes all references to ratings throughout Federal law and regulation, so that the rating agencies will no longer operate as a government-sanctioned oligopoly.

 

Protecting Consumers Through Improved Disclosure and Complaint Resolution Procedures. The Republican plan expands the mission of the Financial Literacy and Education Commission to include consumer protection and disclosure issues by giving it the authority to direct regulated entities to disclose relevant policies, procedures, guidelines, standards and regulatory filings on their websites. It streamlines the complaint process for consumers and investors by establishing a single, toll-free number and website to field consumer inquiries and direct them to the appropriate regulatory enforcement agency.

 

Strengthening Anti-Fraud Enforcement. Increases both civil and criminal money penalties in government enforcement actions, maximizes restitution for victims of fraud, improves surveillance of bad actors who prey on consumers, and allows regulators to share information with foreign regulators and law enforcement agencies engaged in the investigation and prosecution of violations of financial laws without waiving privileges. Monetary recoveries above what is needed to make full restitution to harmed investors or consumers would be used to hire additional enforcement staff.

[Guest Brad Dayspring]

Republican Whip Eric Cantor (R-VA) today issued the following statement supporting the introduction of a comprehensive House Republican regulatory reform plan introduced by Financial Services Ranking Member, Rep. Spencer Bachus:

 

"We need smart regulation, not necessarily more regulation. The Administration has placed too much emphasis on government and too little on people. Providing even more power to the same regulators who presided over the market breakdown is not intelligent. The culture of bailouts must stop, and instead of adding yet another layer to the current patchwork regulatory system, we need to bring stability and security back to the market so credit starts flowing and jobs are created.

 

“Today, thanks to the leadership of Ranking Member Bachus and Republicans on the Financial Services Committee, Republicans are united to reduce uncertainty and to stop the government from picking winners and losers in the marketplace. We want to see market forces return under a set of smart, focused rules to restore financial security for families across this country. We stand ready and willing to work together so that our capital markets can return to prominence, small businesses can access credit, and America starts creating jobs again."

 

The Consumer Protection and Regulatory Enhancement Act will:

 

• Provide for the resolution of insolvent non-bank financial institutions — no matter how large or systemically important — through the bankruptcy system.

 

• Create a Market Stability and Capital Adequacy Board that is charged with monitoring the interactions of various sectors of the financial system, and identifying risks that could endanger the stability and soundness of the system.

 

• Establish an Office of Consumer Protection, with enhanced authority, within a consolidated regulatory agency to streamline in one place responsibility for rulemaking and enforcement of Federal consumer protection laws.

 

• Restore the Federal Reserve’s monetary policy mandate by relieving it of current regulatory and supervisory responsibilities.

 

• End taxpayer subsidies of Fannie Mae and Freddie Mac

 

• End Federal regulators’ reliance on use of credit rating agencies.

[Guest Literati]

New Yorkers react to President Barack Obama's speech on imposing new financial regulations.

 

[Guest Human]

In a nutshell, if the current "reform" legislation passes as is, the Chicago Mercantile Exchange, run by President Obama's buddies, would immediately establish an almost complete monopoly on the exchanges needed to comply with the legislation dealing with the trillions of dollars of derivatives transactions each year. It is estimated that the Chicago Mercantile Exchange would benefit immediately with over $1 billion in additional revenue due to this heist in the name of "reform" (perhaps the Obama SEC should investigate this deal.)

 

http://www.congress.org/congressorg/bio/userletter/?letter_id=5076465531&content_dir=congressorg

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New Yorkers react to President Barack Obama's speech on imposing new financial regulations.

 

[Guest Tea Party Patriot]

Human,

You would make a good Tea Party member.

[Guest CPNYS]

The Great Chicago Bank Heist of the 21st Century Exposed

Conservative and GOP Leaders Respond to President Obama's Cooper Union Speech

 

What do New Yorkers call the so-called Obama Financial Services Reform? "The Great Chicago Bank Heist of the 21st Century!" Under the guise of protecting Main Street and the middle-class, President Obama and his Chicago political machine (Emanuel, Axelrod, Durbin, Jarrett) are secretly preparing to shift thousands of jobs from New York City to Chicago - along with billions of dollars of tax revenue. The Chicago political gang's first step in trying to move the financial center of our country and the financial capital of the world from the Big Apple to the Windy City will begin with this so-called "reform." And worse yet, our New York Democratic Congressional delegation led by Senators Chuck Schumer and Kirsten Gillibrand, are standing by letting it happen even while welcoming President Obama to New York City today.

 

In a nutshell, if the current "reform" legislation passes as is, the Chicago Mercantile Exchange, run by President Obama's buddies, would immediately establish an almost complete monopoly on the exchanges needed to comply with the legislation dealing with the trillions of dollars of derivatives transactions each year. It is estimated that the Chicago Mercantile Exchange would benefit immediately with over $1 billion in additional revenue due to this heist in the name of "reform" (perhaps the Obama SEC should investigate this deal.)

 

Currently, most of these derivative transactions are processed through New York-based banks or financial firms with significant trading operations in New York City. These transactions generate approximately $28 billion in annual profits of which billions of taxes are paid to New York City and New York State. They employ thousands of persons and donate to our local charities and little leagues. This also generates hundreds of millions of dollars of additional revenue for smaller banks, brokerages and other businesses that feed off the financial sector. If Obama's bank heist legislation is passed, the New York-based exchanges would not have enough time to set up the operations necessary to accommodate the new rules and hence the Chicago Mercantile Exchange would establish itself as the center of most of these transactions. The way this business works, once you have an "open interest" in one exchange, you keep most of your business with that exchange (to offset margin requirements); so once that is established it is virtually impossible for it to ever be moved.

 

This business will be forever moved from New York City to Chicago and with it many financial institutions would move more of their operations to Chicago as well. It is conceivable that one day even the stock markets could move to Chicago.

 

This bill is a job stimulus bill for Chicago and a job killer for New York City. Why can't Senators Schumer and Gillibrand create a level-playing field for New Yorkers? Senators Schumer and Gillibrand, along with the rest of the Democratic Congressional delegation, continue to kowtow to President Obama and his Chicago political gang instead of standing up and fighting on behalf of New Yorkers! That's their job and if they continue to prove they aren't prepared to do their job, then New Yorkers are going to shift their jobs to someone who will stand up and fight for them in November.

 

This will be the largest transfer of wealth from one city to another in world history. Imagine what would happen to New York City and New York State if Chicago became the financial center of the United States and the financial capital of the world. If President Obama and his buddies at the Chicago Mercantile Exchange have their way, you won't have to imagine too hard - this will become the Obama legacy on New York, otherwise known as the Great Chicago Bank Heist of the 21st Century.

[Guest Tyler Durden]

Once again we get confirmation that Chris Dodd is nothing but a paid manservant for his Federal Reserve masters, in addition to being a lame duck, whose last days in office are meant to do everything to allow the old-school Wall Street ways of endless secrecy and Fed bailouts to continue in perpetuity. As Ryan Grim points out "Alan Grayson and co-author Rep. Ron Paul passed legislation through the House that would allow the Government Accountability Office (GAO) to audit the Federal Reserve and, after a delay, release the information to Congress. It was a remarkable victory, with a populist coalition beating back the combined lobbying efforts of the Treasury Department, the Fed and Wall Street banks. The Senate has been more hostile territory for the Fed audit provision. Banking Committee Chairman Chris Dodd (D-Conn.) opposes the Grayson-Paul version, but allowed a much more restrictive audit proposal from Sen. Jeff Merkley (D-Oregon) into his bill." Why and how Dodd believes he can stand against this critical issue, that over 80% of America supports by demanding Fed transparency, is beyond any rational attempts at explanation. How he hopes to get away with it is even more mindboggling.

[Guest Human]

Thank You, It's an Honor. :)

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Human,

You would make a good Tea Party member.

[Guest LAW]

Remarks by the President on Wall Street Reform

Cooper Union, New York, New York

 

11:50 A.M. EDT

 

THE PRESIDENT: Thank you very much. Everybody, please have a seat. Thank you very much. Well, thank you. It is good to be back. (Applause.) It is good to be back in New York, it is good to be back in the Great Hall at Cooper Union. (Applause.)

 

We’ve got some special guests here that I want to acknowledge. Congresswoman Carolyn Maloney is here in the house. (Applause.) Governor David Paterson is here. (Applause.) Attorney General Andrew Cuomo. (Applause.) State Comptroller Thomas DiNapoli is here. (Applause.) The Mayor of New York City, Michael Bloomberg. (Applause.) Dr. George Campbell, Jr., president of Cooper Union. (Applause.) And all the citywide elected officials who are here. Thank you very much for your attendance.

 

It is wonderful to be back in Cooper Union, where generations of leaders and citizens have come to defend their ideas and contest their differences. It’s also good to be back in Lower Manhattan, a few blocks from Wall Street. (Laughter.) It really is good to be back, because Wall Street is the heart of our nation’s financial sector.

 

Now, since I last spoke here two years ago, our country has been through a terrible trial. More than 8 million people have lost their jobs. Countless small businesses have had to shut their doors. Trillions of dollars in savings have been lost -- forcing seniors to put off retirement, young people to postpone college, entrepreneurs to give up on the dream of starting a company. And as a nation we were forced to take unprecedented steps to rescue the financial system and the broader economy.

 

And as a result of the decisions we made -- some of which, let’s face it, were very unpopular -- we are seeing hopeful signs. A little more than one year ago we were losing an average of 750,000 jobs each month. Today, America is adding jobs again. One year ago the economy was shrinking rapidly. Today the economy is growing. In fact, we’ve seen the fastest turnaround in growth in nearly three decades.

 

But you’re here and I’m here because we’ve got more work to do. Until this progress is felt not just on Wall Street but on Main Street we cannot be satisfied. Until the millions of our neighbors who are looking for work can find a job, and wages are growing at a meaningful pace, we may be able to claim a technical recovery -- but we will not have truly recovered. And even as we seek to revive this economy, it’s also incumbent on us to rebuild it stronger than before. We don’t want an economy that has the same weaknesses that led to this crisis. And that means addressing some of the underlying problems that led to this turmoil and devastation in the first place.

Now, one of the most significant contributors to this recession was a financial crisis as dire as any we’ve known in generations -- at least since the ’30s. And that crisis was born of a failure of responsibility -- from Wall Street all the way to Washington -- that brought down many of the world’s largest financial firms and nearly dragged our economy into a second Great Depression.

 

It was that failure of responsibility that I spoke about when I came to New York more than two years ago -- before the worst of the crisis had unfolded. It was back in 2007. And I take no satisfaction in noting that my comments then have largely been borne out by the events that followed. But I repeat what I said then because it is essential that we learn the lessons from this crisis so we don’t doom ourselves to repeat it. And make no mistake, that is exactly what will happen if we allow this moment to pass -- and that’s an outcome that is unacceptable to me and it’s unacceptable to you, the American people. (Applause.)

 

As I said on this stage two years ago, I believe in the power of the free market. I believe in a strong financial sector that helps people to raise capital and get loans and invest their savings. That’s part of what has made America what it is. But a free market was never meant to be a free license to take whatever you can get, however you can get it. That’s what happened too often in the years leading up to this crisis. Some -- and let me be clear, not all -- but some on Wall Street forgot that behind every dollar traded or leveraged there’s family looking to buy a house, or pay for an education, open a business, save for retirement. What happens on Wall Street has real consequences across the country, across our economy.

 

I’ve spoken before about the need to build a new foundation for economic growth in the 21st century. And given the importance of the financial sector, Wall Street reform is an absolutely essential part of that foundation. Without it, our house will continue to sit on shifting sands, and our families, businesses, and the global economy will be vulnerable to future crises. That’s why I feel so strongly that we need to enact a set of updated, commonsense rules to ensure accountability on Wall Street and to protect consumers in our financial system. (Applause.)

 

Now, here’s the good news: A comprehensive plan to achieve these reforms has already passed the House of Representatives. (Applause.) A Senate version is currently being debated, drawing on ideas from Democrats and Republicans. Both bills represent significant improvement on the flawed rules that we have in place today, despite the furious effort of industry lobbyists to shape this legislation to their special interests.

 

And for those of you in the financial sector I'm sure that some of these lobbyists work for you and they’re doing what they are being paid to do. But I’m here today specifically -- when I speak to the titans of industry here -- because I want to urge you to join us, instead of fighting us in this effort. (Applause.) I’m here because I believe that these reforms are, in the end, not only in the best interest of our country, but in the best interest of the financial sector. And I’m here to explain what reform will look like, and why it matters.

 

Now, first, the bill being considered in the Senate would create what we did not have before, and that is a way to protect the financial system and the broader economy and American taxpayers in the event that a large financial firm begins to fail. If there’s a Lehmans or an AIG, how can we respond in a way that doesn’t force taxpayers to pick up the tab or, alternatively, could bring down the whole system.

 

In an ordinary local bank when it approaches insolvency, we’ve got a process, an orderly process through the FDIC, that ensures that depositors are protected, maintains confidence in the banking system, and it works. Customers and taxpayers are protected and owners and management lose their equity. But we don’t have that kind of process designed to contain the failure of a Lehman Brothers or any of the largest and most interconnected financial firms in our country.

 

That’s why, when this crisis began, crucial decisions about what would happen to some of the world’s biggest companies -- companies employing tens of thousands of people and holding hundreds of billions of dollars in assets -- had to take place in hurried discussions in the middle of the night. And that’s why, to save the entire economy from an even worse catastrophe, we had to deploy taxpayer dollars. Now, much of that money has now been paid back and my administration has proposed a fee to be paid by large financial firms to recover all the money, every dime, because the American people should never have been put in that position in the first place. (Applause.)

 

But this is why we need a system to shut these firms down with the least amount of collateral damage to innocent people and innocent businesses. And from the start, I’ve insisted that the financial industry, not taxpayers, shoulder the costs in the event that a large financial company should falter. The goal is to make certain that taxpayers are never again on the hook because a firm is deemed “too big to fail.”

 

Now, there’s a legitimate debate taking place about how best to ensure taxpayers are held harmless in this process. And that’s a legitimate debate, and I encourage that debate. But what’s not legitimate is to suggest that somehow the legislation being proposed is going to encourage future taxpayer bailouts, as some have claimed. That makes for a good sound bite, but it’s not factually accurate. It is not true. (Applause.) In fact, the system as it stands -- the system as it stands is what led to a series of massive, costly taxpayer bailouts. And it’s only with reform that we can avoid a similar outcome in the future. In other words, a vote for reform is a vote to put a stop to taxpayer-funded bailouts. That’s the truth. End of story. And nobody should be fooled in this debate. (Applause.)

 

By the way, these changes have the added benefit of creating incentives within the industry to ensure that no one company can ever threaten to bring down the whole economy.

 

To that end, the bill would also enact what’s known as the Volcker Rule -- and there’s a tall guy sitting in the front row here, Paul Volcker -- (applause) -- who we named it after. And it does something very simple: It places some limits on the size of banks and the kinds of risks that banking institutions can take. This will not only safeguard our system against crises, this will also make our system stronger and more competitive by instilling confidence here at home and across the globe. Markets depend on that confidence. Part of what led to the turmoil of the past two years was that in the absence of clear rules and sound practices, people didn’t trust that our system was one in which it was safe to invest or lend. As we’ve seen, that harms all of us.

 

So by enacting these reforms, we’ll help ensure that our financial system -- and our economy -- continues to be the envy of the world. That’s the first thing, making sure that we can wind down one firm if it gets into trouble without bringing the whole system down or forcing taxpayers to fund a bailout.

 

Number two, reform would bring new transparency to many financial markets. As you know, part of what led to this crisis was firms like AIG and others who were making huge and risky bets, using derivatives and other complicated financial instruments, in ways that defied accountability, or even common sense. In fact, many practices were so opaque, so confusing, so complex that the people inside the firms didn’t understand them, much less those who were charged with overseeing them. They weren’t fully aware of the massive bets that were being placed. That’s what led Warren Buffett to describe derivatives that were bought and sold with little oversight as “financial weapons of mass destruction.” That’s what he called them. And that’s why reform will rein in excess and help ensure that these kinds of transactions take place in the light of day.

 

Now, there’s been a great deal of concern about these changes. So I want to reiterate: There is a legitimate role for these financial instruments in our economy. They can help allay risk and spur investment. And there are a lot of companies that use these instruments to that legitimate end -- they are managing exposure to fluctuating prices or currencies, fluctuating markets. For example, a business might hedge against rising oil prices by buying a financial product to secure stable fuel costs, so an airlines might have an interest in locking in a decent price. That’s how markets are supposed to work. The problem is these markets operated in the shadows of our economy, invisible to regulators, invisible to the public. So reckless practices were rampant. Risks accrued until they threatened our entire financial system.

 

And that’s why these reforms are designed to respect legitimate activities but prevent reckless risk taking. That’s why we want to ensure that financial products like standardized derivatives are traded out in the open, in the full view of businesses, investors, and those charged with oversight.

 

And I was encouraged to see a Republican senator join with Democrats this week in moving forward on this issue. That's a good sign. (Applause.) That's a good sign. For without action, we’ll continue to see what amounts to highly-leveraged, loosely-monitored gambling in our financial system, putting taxpayers and the economy in jeopardy. And the only people who ought to fear the kind of oversight and transparency that we're proposing are those whose conduct will fail this scrutiny.

 

Third, this plan would enact the strongest consumer financial protections ever. (Applause.) And that's absolutely necessary because this financial crisis wasn’t just the result of decisions made in the executive suites on Wall Street; it was also the result of decisions made around kitchen tables across America, by folks who took on mortgages and credit cards and auto loans. And while it’s true that many Americans took on financial obligations that they knew or should have known they could not have afforded, millions of others were, frankly, duped. They were misled by deceptive terms and conditions, buried deep in the fine print.

 

And while a few companies made out like bandits by exploiting their customers, our entire economy was made more vulnerable. Millions of people have now lost their homes. Tens of millions more have lost value in their homes. Just about every sector of our economy has felt the pain, whether you’re paving driveways in Arizona, or selling houses in Ohio, or you're doing home repairs in California, or you’re using your home equity to start a small business in Florida.

 

That’s why we need to give consumers more protection and more power in our financial system. This is not about stifling competition, stifling innovation; it’s just the opposite. With a dedicated agency setting ground rules and looking out for ordinary people in our financial system, we will empower consumers with clear and concise information when they’re making financial decisions. So instead of competing to offer confusing products, companies will compete the old-fashioned way, by offering better products. And that will mean more choices for consumers, more opportunities for businesses, and more stability in our financial system. And unless your business model depends on bilking people, there is little to fear from these new rules. (Applause.)

 

Number four, the last key component of reform. These Wall Street reforms will give shareholders new power in the financial system. They will get what we call a say on pay, a voice with respect to the salaries and bonuses awarded to top executives. And the SEC will have the authority to give shareholders more say in corporate elections, so that investors and pension holders have a stronger role in determining who manages the company in which they’ve placed their savings.

 

Now, Americans don’t begrudge anybody for success when that success is earned. But when we read in the past, and sometimes in the present, about enormous executive bonuses at firms -- even as they’re relying on assistance from taxpayers or they’re taking huge risks that threaten the system as a whole or their company is doing badly -- it offends our fundamental values.

 

Not only that, some of the salaries and bonuses that we’ve seen creates perverse incentives to take reckless risks that contributed to the crisis. It’s what helped lead to a relentless focus on a company’s next quarter, to the detriment of its next year or its next decade. And it led to a situation in which folks with the most to lose -- stock and pension holders -- had the least to say in the process. And that has to change. (Applause.)

 

Let me close by saying this. I have laid out a set of Wall Street reforms. These are reforms that would put an end to taxpayer bailouts; that would bring complex financial dealings out of the shadows; that would protect consumers; and that would give shareholders more power in the financial system. But let’s face it, we also need reform in Washington. (Applause.) And the debate -- the debate over these changes is a perfect example.

 

I mean, we have seen battalions of financial industry lobbyists descending on Capitol Hill, firms spending millions to influence the outcome of this debate. We’ve seen misleading arguments and attacks that are designed not to improve the bill but to weaken or to kill it. We’ve seen a bipartisan process buckle under the weight of these withering forces, even as we‘ve produced a proposal that by all accounts is a commonsense, reasonable, non-ideological approach to target the root problems that led to the turmoil in our financial sector and ultimately in our entire economy.

 

So we’ve seen business as usual in Washington, but I believe we can and must put this kind of cynical politics aside. We’ve got to put an end to it. That’s why I’m here today. (Applause.) That’s why I’m here today.

 

And to those of you who are in the financial sector, let me say this, we will not always see eye to eye. We will not always agree. But that doesn’t mean that we’ve got to choose between two extremes. We do not have to choose between markets that are unfettered by even modest protections against crisis, or markets that are stymied by onerous rules that suppress enterprise and innovation. That is a false choice. And we need no more proof than the crisis that we’ve just been through.

 

You see, there has always been a tension between the desire to allow markets to function without interference and the absolute necessity of rules to prevent markets from falling out of kilter. But managing that tension, one that we’ve debated since the founding of this nation, is what has allowed our country to keep up with a changing world. For in taking up this debate, in figuring out how to apply well-worn principles with each new age, we ensure that we don’t tip too far one way or the other -- that our democracy remains as dynamic and our economy remains as dynamic as it has in the past. So, yes, this debate can be contentious. It can be heated. But in the end it serves only to make our country stronger. It has allowed us to adapt and to thrive.

 

And I read a report recently that I think fairly illustrates this point. It’s from Time Magazine. I’m going to quote: “Through the great banking houses of Manhattan last week ran wild-eyed alarm. Big bankers stared at one another in anger and astonishment. A bill just passed… would rivet upon their institutions what they considered a monstrous system… such a system, they felt, would not only rob them of their pride of profession but would reduce all U.S. banking to its lowest level.” That appeared in Time Magazine in June of 1933. (Laughter and applause.) The system that caused so much consternation, so much concern was the Federal Deposit Insurance Corporation, also known as the FDIC, an institution that has successfully secured the deposits of generations of Americans.

 

In the end, our system only works -- our markets are only free -- when there are basic safeguards that prevent abuse, that check excesses, that ensure that it is more profitable to play by the rules than to game the system. And that is what the reforms we’ve been proposing are designed to achieve -- no more, no less. And because that is how we will ensure that our economy works for consumers, that it works for investors, and that it works for financial institutions -- in other words, that it works for all of us -- that’s why we’re working so hard to get this stuff passed.

 

This is the central lesson not only of this crisis but of our history. It’s what I said when I spoke here two years ago. Because ultimately, there is no dividing line between Main Street and Wall Street. We will rise or we will fall together as one nation. (Applause.) And that is why I urge all of you to join me. I urge all of you to join me, to join those who are seeking to pass these commonsense reforms. And for those of you in the financial industry, I urge you to join me not only because it is in the interest of your industry, but also because it’s in the interest of your country.

 

Thank you so much. God bless you, and God bless the United States of America. Thank you. (Applause.)

 

END

12:16 P.M. EDT

[Guest The White House]

It has now been two years since the collapse of Bear Stearns and more than a year since the financial crisis peaked. Trillions of dollars in household wealth were erased and over 8 million jobs were lost, in large part, because of failures in our financial system. And yet today the same failed regulatory system remains in place.

 

The Obama Administration has made Wall Street reform a top priority since day one, and there is broad consensus on the critical need for reform. President Obama supports a Wall Street Reform bill that holds Wall Street accountable, protects and empowers American consumers with the strongest consumer protections ever, increases transparency in financial dealings -- including in the derivatives market -- and ends taxpayer bailouts once and for all. With legislation moving to the Senate floor in the coming days, we wanted to take this opportunity to provide a concise overview of the key elements of Wall Street reform.

 

1. Holding Wall Street Accountable

 

The financial crisis was the result of a fundamental failure from Wall Street to Washington. Wall Street took irresponsible risks that they didn’t fully understand and Washington did not have the authority to properly monitor or constrain risk-taking at the largest firms. When the crisis hit, they did not have the tools to break apart or wind down a failing financial firm without putting the American taxpayer and the entire financial system at risk.

 

Taxpayers Should Not Have To Bear The Costs Of Wall Street’s Irresponsibility. If a firm fails in the future it must be Wall Street – not the taxpayers – that pay the price.

 

Wall Street Must Be Held Accountable – And Pay The Taxpayers Back For The Costs of TARP. The Financial Crisis Responsibility Fee would apply to firms that benefited most – both directly and indirectly – from extraordinary assistance. It would make sure that American taxpayers are repaid in full for preventing the collapse of the financial sector. This fee would only apply to the 50 largest firms and it will be adjusted based on the risks of financial firms in order to discourage financial institutions from the kinds of excessive size and risk-taking that contributed to the financial crisis.

 

We Must Separate “Proprietary Trading” From The Business of Banking. The “Volcker Rule” would ensure that banks are no longer allowed to own, invest, or sponsor hedge funds, private equity funds, or proprietary trading operations for their own profit, unrelated to serving their customers. Responsible trading is a good thing for the markets and the economy, but firms should not be allowed to run hedge funds and private equity funds while running a bank.

 

The Only Way To End Bailouts Is Serious Reform. No firm should be “Too Big To Fail”. We must constrain the growth of the largest financial firms; restrict the riskiest financial activities; and create a mechanism for the government to shut down failing financial companies without precipitating a financial panic that leaves taxpayers and small businesses on the hook.

2. Protecting American Families From Unfair, Abusive Financial Practices

 

Too many responsible American families have paid the price for an outdated regulatory system that left our financial system vulnerable to collapse and left families without adequate protections. We must protect and empower families with the strongest consumer protections ever.

 

We Must Establish An Independent Consumer Financial Protection Agency To Set And Enforce Clear, Consistent Rules For The Financial Marketplace. A single consumer agency will set clear rules of the road and ensure that financial firms are held to high standards. For example:

 

* For families who want to buy a home: The piles of forms needed for a regular mortgage can be overwhelming, and many brokers have taken advantage of that confusion to give borrowers loans they didn’t need or couldn’t afford. The new consumer financial protection agency will take steps to consolidate and simplify with plain language two overlapping and sometimes inconsistent federal mortgage forms. The agency will, for the first time, provide ongoing federal oversight of both nonbank companies and banks in the mortgage market and protect borrowers from unfair, deceptive or other illegal mortgage lending practices.

* For families with credit cards: The new consumer financial protection agency will enforce the new credit card law signed by President Obama that bans rate hikes on existing balances and other unfair practices. For families who have used credit cards to get by when times are tight, the law will give them clarity on the interest rates they are charged.

* For families caught by unexpected overdraft fees: Many households have been automatically enrolled in expensive overdraft programs. These programs can hit consumers with costly overdraft fees for even the smallest purchases. For example, the FDIC found that the average overdraft charge for a single purchased item—like a $2 cup of coffee—is $30 at banks with assets more than $1 billion. The new consumer financial protection agency will enforce new rules that give consumers a real choice as to whether to join expensive overdraft programs so that they are not unknowingly charged unnecessary fees. [FDIC, “FDIC Study of Bank Overdraft Programs” (November 2008) at Table IV‐3]

 

Today, There Are Seven Different Regulators With Authority Over The Consumer Financial Services Marketplace. Accountability is lacking because responsibility is diffuse and fragmented. In addition, many mortgage lenders and mortgage brokers were almost completely unregulated. That must change.

3. Closing The Gaps In Our Financial System

 

This crisis demonstrated that the rules governing our financial system are inadequate. Two years since the collapse of Bear Stearns and one year since the financial crisis peaked, we still have these very same, inadequate rules in place. We must modernize our financial system and take the necessary steps to close the gaps in our system and eliminate regulatory arbitrage.

 

We Must Address the Gaps that led to Regulatory Failure – At Its Peak, The “Shadow Banking System” Financed About $8 Trillion In Assets. In the lead-up to the financial crisis, our regulatory system as a whole failed. One of the greatest weaknesses of our financial system was the risk that built up in the “shadow banking” system where there was explosive growth in a range of financial firms that acted much like banks – but operated without oversight.

 

Market Discipline Is Not Enough. Relying on market discipline to compensate for weak regulation and then leaving it to the government to clean up the mess is not a good strategy for economic growth nor financial security.

 

Our Financial System Needs Clear Accountability. There is no substitute for vigorous, consistent enforcement of the laws governing the financial system. But each regulator should have a clear mission and the authority to execute that mission.

 

* We must eliminate the gaps and loopholes that allowed large firms like AIG to avoid strong, comprehensive federal oversight.

* To achieve accountability, it must be clear that there is one entity with the responsibility and the authority to supervise the most complicated firms. We believe that the Federal Reserve is best equipped to play that role.

 

4. Reform is Critical to Market Certainty and Stable Growth

 

Reform is central to providing a foundation for stable growth. Our financial system is most competitive when our system is stable, resilient and transparent.

 

Reforms Will Make The Financial Industry And The Markets They Operate In Stronger, Safer, And More Competitive. Real reform must include:

 

* Clearer accountability in supervision and regulation so that financial firms can operate under a coherent set of rules and expectations without the current regulatory arbitrage opportunities that allow some firms to “game the system.”

* Stronger capital buffers to increase the ability of financial companies to weather the ups and downs of financial markets.

* Lesser concentration of risk among the largest financial firms so that any one firm can fail without creating a domino effect throughout the entire financial system that jeopardizes jobs, family savings and the entire economy .

* Greater transparency in the derivatives market that will make the system safer by providing regulators with the data they need to manage systemic risk and help ensure the integrity of financial markets so we can prevent future AIG-like disasters.

 

Comprehensive Reform Is Important To Generate Innovation And Economic Growth. A key test of a strong financial system is whether or not it effectively channels savings to finance future innovation. Today’s system produced waves of credit bubbles and real estate booms followed by severe financial shocks and damage. We need a financial system that is not only interested in short-term profits, but in long-term growth, entrepreneurship, and savings.

 

Leading the Way on International Financial Reform. We are working in parallel with our international partners to make sure that as we move to reform and strengthen our financial system at home, the G20 is moving to implement reforms to achieve a level playing field.

5. We Must Act Now

 

We Are Still At Risk. Although our major financial institutions are much stronger today, our economy is much more vulnerable to the risk of future crises. Without reform, the actions taken to save the financial system from collapse will have added to moral hazard and will have added to the risk that private actors in the future will take in the expectation they will be protected from losses. Without reform, risk will build up again where it is not effectively constrained and future governments will have to act again to socialize private losses in the interest of preventing catastrophic damage.

 

The Obama Administration Has Made Financial Reform A Top Priority Since Day One:

 

* President Obama signed a new law to ban unfair credit card practices in May 2009

* The Administration released a comprehensive policy proposal for financial reform in June 2009

* The Administration delivered 13 titles of proposed legislation to Capitol Hill over the summer

* The Administration provided legislative language detailing the Volcker rule in recent weeks

* Secretary Geithner has testified up on Capitol Hill on financial reform some 10 times

* The Administration has engaged hundreds of stakeholders from a wide variety of groups including consumer advocates, labor, minority and civil rights groups, small and large businesses in meetings in Washington and around the country

* President Obama held a meeting at the White House recently with the bipartisan leadership in the House and Senate to discuss the need for Wall Street reform

[Guest American 4 Progress]

Senate Republicans, joined by Sen. Ben Nelson (D-NE), voted yesterday to prevent a key Wall Street reform bill from reaching the floor for debate, thereby launching "a standoff that throws the sweeping legislation into a period of uncertainty." The legislation is meant to prevent a repeat of the 2008 financial crisis by reining in the activities of the country's largest financial institutions, bringing risky financial instruments out of the dark, and ensuring that taxpayer money is never again used to prop up a failed financial firm. The bill would authorize the creation of a $50 billion bank-financed fund to help the federal government close any large financial institution seen as threatening the stability of the system. The overhaul would also include a consumer protection agency and establish a new oversight structure for hedge funds and derivatives -- the complex financial instruments that played a key role in the 2008 collapse. Yet following their pattern of obstructing any major piece of legislation since President Obama's inauguration -- and after a close-knit Wall Street lobbying campaign -- Republicans blocked the measure from consideration. Obama criticized Republicans for the move, urging them to "put the interests of the country ahead of party."

[Guest Xavier]

Goldman made billions shorting the stock market and all of us. They are pretending that they are so big that they were not aware of what another department is doing. Where is the Beef to their argument.