WASHINGTON - Wall Street and its allies have been calling the shots in Congress
for decades, so they must be glad to see how things are shaping up on
financial regulatory reform. Congress is about to vote on a final bill
that fails to fix the key flaws in the bills passed by both the House
and Senate. At the start of this process I made clear that I had a simple test for
financial reform -- will it stop another financial meltdown? This bill
fails that test, and I won't support legislation that fails to protect
the people of Wisconsin from the pain of another economic disaster. And I
don't need to be lectured about this issue by people who supported the
repeal of Glass-Steagall, which paved the way for this terrible
I had hoped I would be able to support the legislation, given the
clear need for strong reform. I cosponsored a number of critical
amendments during Senate consideration of the bill including a
Cantwell-McCain amendment to restore Glass-Steagall safeguards, Senator
Dorgan's amendment that addressed the problem of "too big to fail"
financial institutions, and another "too big to fail" reform offered by
Senators Brown and Kaufman that proposed strict limits on the size of
those institutions. Each of those amendments would have improved the
bill significantly, and each of them either failed or was blocked from
even getting a vote.
After that, it wasn't a close call for me. It would be a huge
mistake to pass a bill that purports to re-regulate the financial
industry but is simply too weak to protect people from the recklessness
of Wall Street. That would be like building an impressive-looking dam
without telling everyone that it has a few leaks in it. False security
is no security at all.
Since the Senate bill passed, I have had a number of conversations
with key members of the administration, Senate leadership and the
conference committee that drafted the final bill. Unfortunately, not
once has anyone suggested in those conversations the possibility of
strengthening the bill to address my concerns and win my support.
People want my vote, but they want it for a bill that, while including
some positive provisions, has Wall Street's fingerprints all over it.
In fact, reports indicate that the administration and conference
leaders have gone to significant lengths to avoid making the bill
stronger. Rather than discussing with me ways to strengthen the bill,
for example, they chose to eliminate a levy that was to be imposed on
the largest banks and hedge funds in order to obtain the vote of members
who prefer a weaker bill. Nothing could be more revealing of the
true position of those who are crafting this legislation. They had a
choice between pursuing a weaker bill or a stronger one. Their decision
On this bill, like the others that preceded it, the biggest financial
interests have won.
I've seen this too many times before. When I was in the Wisconsin
State Senate, I chaired the Senate Banking Committee for nearly a
decade, and fought against enactment of an interstate banking law that
resulted in the concentration of financial assets and most large
Wisconsin banks being bought up by even larger out-of-state banks.
Shortly after I came to the U.S. Senate we considered a national
interstate banking bill, the Riegle-Neal Interstate Banking and
Branching Act of 1994, which accelerated the concentration of financial
assets, and the creation of "too big to fail" firms. I was one of only
four senators to oppose that legislation. Five years later, I was
one of only eight Senators to oppose the Gramm-Leach-Bliley Act, the
bill that repealed Glass-Steagall and paved the way for this disastrous
recession, which has been an economic nightmare for so many Americans.
Those two measures -- the 1994 law and the 1999 law -- accelerated
the trend toward increased concentration of financial assets,
aggravating the problem of "too big to fail." Before those two laws
were enacted, the six largest U.S. banks had assets equal to 17 percent
of our GDP. Today the six largest U.S. banks have assets equal to more
than 60 percent of our GDP.
Ultimately, it was the threat of the failure of the nation's largest
financial institutions that spurred the Wall Street bailout. I opposed
that measure as well, in part because it was not tied to any
fundamental reforms of our financial system that would prevent a future
crisis and the need for another bailout. We could have had a much
tougher reform package if the bailout had been tied to such a measure.
Every single one of those bills caved to Wall Street and the biggest
financial interests, and so does the current regulatory reform bill.
Economist Dean Baker called this bill a "fig leaf," and former IMF Economist Simon
Johnson has slammed the bill's failure to address "too big to
fail." These experts paint an accurate picture of this bill's failings,
and frankly those failings shouldn't come as a surprise. Many of the
critical actors who shaped this bill were present at the creation of the
financial crisis. They supported the enactment of Gramm-Leach-Bliley,
deregulating derivatives, even the massive Interstate Banking bill that
helped grease the "too big to fail" skids. It shouldn't be a surprise
to anyone that the final version of the bill looks the way it does, or
that I won't fall in line with their version of "reform."
This bill caves to Wall Street interests, it doesn't meet the test of
preventing another financial crisis, and it won't get my vote.