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It's NOT Such a Wonderful Life. We Need Real Bank Reform Now

Mary Bottari

Today is “Job Summit” Day in the White House and none too soon as more than 16 million Americans will be looking for work this holiday season and many of them will be facing foreclosure in the new year.  The top priorities are to put people back to work and stop the escalating forclosures, but we also have to make sure that Wall Street is never given the chance to collapse the economy again. 

But the package of financial reform measures scheduled to come to the House floor next week simply will not do the job.  There are three areas of the legislation that need improvement. 

Warren Buffett called derivatives "financial weapons of mass destruction," and they need to be forcefully regulated. Right now, the two bills dealing with derivatives contain a variety of loopholes that could be exploited to detonate an economy. Derivatives that are essentially insurance contracts should be regulated as insurance; derivatives that are purely speculative should be subject to state gambling laws. All standardized derivatives should be traded on an open exchange, no exceptions.

The package does create authority for the government to dismantle "too big to fail" financial institutions, but only if they pose a "grave threat" to the economy. This sets too high a bar. These firms should be prevented from growing too big to harm the economy in the first place and the systemically dangerous firms that now exist should be broken up. We need a flat size cap (such as 5% of all assets in the system), and Main Street banks must be separated from Wall Street gambling at all times, everywhere.

To truly protect consumers and put an end to abusive lending before it grows into a giant market, the proposed Consumer Financial Protection Agency must be able to regulate all consumer products and the institutions that sell them. Every abusive lending industry on the planet including the notorious “Rent to Own” firms are petitioning for exemptions from this agency. There should be no exceptions and the  loopholes for auto dealers, credit life insurance, private educational lenders or small banks that are in the bill now should be removed.  Critically, states must not be prevented from legislating or enforcing consumer protection laws.  We cannot afford to take the nation’s top cops, state attorneys general, off the beat when federal regulators have failed us so badly.

As the holiday season approaches, for too many Americans it’s not such a wonderful life right now. A financial sector morphed into a casion has collapsed the economy -- gifting us with layoffs, debt and foreclosures. The top three bailed-out banks alone have spend $71 million in lobbying to weaken these bills in the past year.  But there are more George Baileys in America than Mr. Potters.  Now is the time for us to tell Congress to take a stand.

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Mary Bottari is the Director of the Real Economy Project of the Center for Media and Democracy. You can send a letter to Congress at

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