Plan to fix Wall Street on right track
President Barack Obama outlined his requirements for Wall Street reform for the kingpins of Wall Street on Thursday in New York. Obama presented principles aimed at preventing financial catastrophes such as the recent recession from happening in the future.
His speech was timely, coming one day before the Securities and Exchange Commission filed suit against Goldman Sachs for fraud.
The first of Obama’s desired reforms was the institution of a system to protect taxpayers from future bailouts when large institutions show signs of failure.
This system would establish a Consumer Financial Protection Agency, the purpose of which it would be to protect consumers and regulate providers of financial products and services.
The second requirement was the imposition of the Volcker Rule, which applies restrictions on banks that prohibit sponsoring, ownership and investment in risky trade operations and funds without relation to the banks’ customers.
Obama’s third requirement was to set standards of transparency upon financial tools such as derivatives, credit default swaps and other complicated financial innovations.
A fourth requirement was the assurance that consumers and investors would be protected from financial abuse. In cooperation with the creation of the CFPA, Obama’s plan would strengthen the Financial Services Oversight Council and establish a Financial Consumer Coordinating Council.
The fifth requirement would restructure the powers investors and pension holders have on the people who run their companies and how they are compensated.
Republicans were going full-speed in efforts to block any debate of reform almost immediately after Obama finished his speech. Sen. Mitch McConnell, R-Ky., led the efforts to filibuster the reform debate.
The battles regained their usual tones, with Republicans accusing Democrats of speeding through vote processes and Democrats accusing Republicans of obstructing or stalling progress.
One of the problems McConnell addressed was the proposal of a $50 billion fund he referred to as a bailout fund.
The truth of the matter is that it is not a bailout fund paid for by the government — the fund is paid for by corporations in order to provide protection to consumers during banks’ demise.
Moreover, the fund is something the Obama administration opposes as well due to fears that it could further complicate the bankruptcy process.
The debate over potential legislation seems to get more bipartisan support than the debate over health care primarily because the effects of the recession are still fresh in the minds of Americans everywhere.
The charges against Goldman Sachs have also energized debates amongst members of Congress who are trying to appeal to voters for the upcoming midterm elections.
Wall Street reform needs to be passed, and it needs to address the concerns of the taxpayers — safety from fraud and protection against bearing the burden when the financial industry screws up.
The plan Obama outlined accomplishes many issues related to those concerns. Any legislation should establish laws that protect the economy from the types of catastrophes America suffered in 2008 and 2009 and will hopefully provide a lesson for companies on Wall Street on excessive risk taking.
Andrew Taylor is an economics senior and may be reached at [email protected]