Well, I messed up yesterday and got put down pretty badly. I'm no more expert today than I was then, but I'm going to try again because this fiscal reform stuff is really important. This article isn't as old as the last one (only 5 days) but it is still out of date (written before the Republican filibuster was broken). We need this Glass-Steagall reform, or the meltdown will just happen again (presuming we get a recovery). Time to call your 2 Senators and 1 Congressman on the phone.
The Washington Independent 4-27-10
Audit the Fed. Last year, Rep. Ron Paul (R-Texas) introduced a House bill to audit the Federal Reserve. It garnered 313 cosponsors. A similar measure in the Senate, a budget amendment sponsored by Sen. Charles Grassley (R-Iowa), passed 95 to 1. But a strong provision did not make it into the final Senate legislation. And with the Federal Reserve’s balance sheet more than double its size before the financial crisis — swollen with $1.1 trillion in mortgage-backed securities purchased from Fannie Mae and Freddie Mac plus toxic assets from failed companies like Bear Sterns — a bipartisan group of senators want to force a thorough independent audit of the Fed’s books. Sen. Bernie Sanders (I-Vt.) is sponsoring an amendment that would open up the Fed to an Government Accountability Office audit. The amendment has the stated support of Sen. Russ Feingold (D-Wis.) and Sen. Jim Bunning (R-Ky.), among others, and is expected to come up.
Reinstitute Glass-Steagall provisions. Another popular way to effectively limit bank size is to return to the Depression-era Glass-Steagall rules. The Glass-Steagall Act, mostly repealed in 1999, prevented banks from having both commercial and investment banking arms — as, for instance, J.P. Morgan Chase does today. Sen. Maria Cantwell (D-Wash.) and Sen. John McCain (R-Ariz.) plan to introduce an amendment reintroducing the rule and thus requiring big, diversified banks to split themselves up. Shelby, Sen. Johnny Isakson (R-Ga.) and Sen. John Cornyn (Texas) also support the measure.
An effectively similar, if functionally different, way of breaking up banks or limiting their size is by instituting the Volcker Rule — which bars banks from speculating with their own money by "prop trading" or investing in hedge funds. The current Dodd bill promises to institute something like the Volcker Rule, creating a commission to look at how to institute it down the road. But Sen. Jeff Merkley (D-Ore.) and Sen. Carl Levin (D-Mich.) have ready a measure introducing a more-stringent version immediately.
Fix the ratings agencies. The Dodd bill does little to fix the credit ratings agencies, whose profligate stamping of AAA ratings on collapsing subprime mortgage-backed securities helped to stoke the crisis. (The companies have a conflict of interest at the core of their business, in that they are paid by the companies whose securities they rate.) The Dodd bill creates a new office at the Securities and Exchange Commission to look closely at credit ratings agencies — but does little more to further reform them. Numerous Democratic senators have cited the issue as a major weakness in the bill, and Senate staffers say it is unlikely to go unchanged. Sanders has said he will introduce new language to strengthen oversight over and regulation of the agencies.