Byline: GUEST VIEWPOINT By Peter DeFazio
Last week, almost 20 months after the big banks on Wall Street drove our economy off the cliff, the president signed into law tough financial services reform legislation. House Resolution 4173, the Wall Street Reform and Consumer Protection Act, will demand accountability from the big banks and financial titans on Wall Street and put in place rules to prevent the growth and collapse of another massive speculative bubble.
The bill did not go as far as I wanted in regulating gambling with derivatives or breaking up some of the "too big to fail" conglomerates like Citibank and Goldman Sachs. But it is the most significant regulation of Wall Street since the Great Depression, and a good start toward reining in Wall Street's dominance of our economy to the detriment of Main Street America and the real economy.
The big banks and Wall Street traders deployed more than 3,000 lobbyists and spent $1.4 million a day to try to stop the bill. Their lobbying had a big effect - nearly every Republican and a handful of Democrats opposed the bill. These Wall Street apologists are still backing the failed policies of the last 30 years in asserting that markets and big banks can regulate themselves.
The deregulatory binge began in the early 1980s. Since then, our nation has experienced at least four significant financial scandals costing taxpayers, average investors and pension funds trillions of dollars - not to mention the 8 million jobs we have lost since September 2008. These deregulation failures were the savings and loan collapse of the late 1980s, the 1999 Enron scandal, the 2000 Internet bubble collapse, and the 2008 Wall Street bust.
The shock of the collapse of some big Wall Street firms triggered a panic in the Bush administration. It convinced Democratic leaders in Congress to jam through the Troubled Asset Relief Program, a bailout I vigorously opposed. If Wall Street firms want to set their own rules, then they should live or die by those rules, and not come running, bonuses in hand, with their other hand reaching for a taxpayer bailout.
I have been working to regulate derivatives since the mid- 1990s when I heard Warren Buffet describe them as "financial weapons of mass destruction." Unfortunately, the Clinton administration and the Republican majority in Congress prohibited the regulation of derivatives. In this particular case if you had a collateralized debt obligation of $100 million of bad loans, billions of dollars of bets were wagered against it - magnifying the crisis many times over. …