CHICAGO – Americans for Financial Reform, a coalition of almost all the nation’s unions and more than 200 other organizations, is stepping up efforts this week to push for strong re-regulation of the finance industry.
They will descend on the Oct. 25-27 convention of the American Bankers Association here and “It’ll be a wild fight ahead,” says Heather Booth, the coalition’s director.
Labor and its allies are supporting a financial reform package unveiled by President Obama earlier this year, in response to last September’s financial collapse, which worsened sharply the recession that was then already nine months old.
The president’s package is designed to curb some of the financial practices that led to the crash and to the subsequent onslaught of joblessness and foreclosures.
A key part of the Obama package, as far as the coalition is concerned, is the establishment of a new Consumer Finance Protection Agency that would have the power to stop bankers, brokers, derivative traders and hedge fund managers from repeating practices that the coalition says “pushed the economy into the dumpster, and threw millions out of work or into foreclosure or both.”
Creation of such a consumer protection agency is fiercely opposed by the banking and securities lobbies but public opinion is on the side of tougher regulation of the finance industry.
AFL-CIO President Richard Trumka denounced the financiers in a rousing speech this month on Wall Street. Change-to-Win Chair Anna Burger did the same when she testified, also earlier this month, before the House Financial Services Committee. The committee began its own deliberations on the issue of financial re-regulation last week.
“We can begin to address the irresponsible practices of the banks and the others that led to the financial collapse,” Booth said in a phone interview. “Voices for new transparency and regulation have strong support among the American public. They want their representatives to stand up to the big banks.”
Sen. Byron Dorgan, D-N.D., was one of the few lawmakers who resisted ten years ago when a bipartisan consensus steamrolled financial deregulation through a then-GOP-run Congress. He warned last week that “financial regulation is critical because the financiers are repeating all their excesses.”
Dorgan wrote a much ignored magazine article in 1994 in which he predicted that financial disaster would be the result of deregulation, particularly rules that permitted the sales of derivatives and other “financial gimmicks.”
At a meeting of the New America Foundation, one of the groups in the coalition, Dorgan said, “We’ve extended something like $11 trillion or $12 trillion of taxpayer dollars to right Wall Street since last September, preventing the system from collapsing. But the culture that produced the crash remains the same and must be changed, reined in or both.
“Business is not what it used to be and the financial wreckage has put us in great peril,” he said, as he discussed the de-regulation laws pushed through in 1999. The laws were pushed by the GOP but supported by then-President Clinton and his Treasury Secretary Robert Rubin.
In his speech Dorgan said things happened that should have alerted the government to the crash before things finally came to a head last fall.
“Ads appeared with messages like ‘even if your credit’s in the tank, we specialize in getting you the money you need,'” he said.
Then, he said, there was an explosion in the amount of securities backed only by other pieces of paper. Faced with this, the Federal Reserve and the Commodity Futures Trading Commission, agencies that had the responsibility to act, “instead looked the other way.”
Then, he said, came “the collapse of the sub-prime mortgage market that triggered the fall of the rest of the financial dominoes.”
Dorgan said that radical steps must now be taken.
He called upon the Obama administration to move against “the large institutions that conventional wisdom says are too big to fail.
“Those insitutions include JP Morgan Chase, Bank of America, Wells Fargo and Citibank – all recipients of the federal bailout funds last September. Those insitutions and others just announced a record $140 billion in bonuses. Some of it, I’m sure, went to people who got us into this mess.”
He advocated, as has the AFL-CIO, regulations that would totally separate retail banking from investment banking, as was the case from the time of the New Deal until 1999.
“The retail bankers, most of them small, are relatively safer,” Dorgan said. “Investment bankers got us in the soup. The collapse was the result of unbelievable ignorance and greed.”
Dorgan emphasized that “all trades involving derivatives and all other financial instruments must be open and transparent, as stock trading is supposed to be.”