America must reign in the risky practices and speculative investing that drove us into economic crisis. The excesses of gambling-addicted Wall Street nearly destroyed the economic foundation of our country. We now have an opportunity to clean up those shady practices and help prevent such dramatic shocks to the economy.
The current financial reform legislation is an important step in preventing another financial disaster. The Dodd-Frank bill is clearly a step in the right direction, but we still have miles to go before we can rest assured that Wall Street will not swindle us again.
First, the Dodd-Frank bill expands the regulatory oversight functions of the Securities and Exchange Commission and the Federal Reserve, bringing credit default swaps and other derivatives under their scrutiny.
More importantly, the bill will make derivatives trading public, shedding light on a practice that had been taking place behind closed doors. These investments will have to trade in open exchanges through clearinghouses.
Dodd-Frank also limits the risks financial institutions can take with their customers’ money while seeking to increase profits for themselves. Banks will be able to use only 3% of their tier one capital for investing in hedge funds or private equities.
Further, the legislation will limit the risks banks can take with their clients’ money. Banks will have to spin-off any divisions investing in equities, commodities, or junk credit default swaps, making these practices separate from the core functions of regular banking. The bill also prevents banks from conducting business that may be in conflict with the interests of their customers.
Unfortunately, this bill does not do enough to control risk and limit gambling by our nation’s banks.
Spinning off high-risk credit default swap divisions is a great start, but the bill leaves interest rate swaps and investment-grade credit default swaps untouched. In short, these practices will still pose significant risks to regular account holders because banks will not have to meet higher capital requirements.
The bill calls for an audit of the Federal Reserve, but this should be a common, regular practice and not a one-time event for the agency that controls America’s monetary policy.
The way I was brought up, if you do something wrong, then you must suffer the punishment. That concept seems lost on Washington politicians, like Joe Wilson, who voted to bail out the failed banks of Wall Street.
Now that American taxpayers are footing the bill for the irresponsible behavior of CEOs, will Washington answer the call of duty and prevent this sort of financial disaster from happening again?
People on Main Street have been forced to tighten their belts, threatening their ability to buy even essentials for daily life. It is time for Wall Street to do the same and take control of their recklessness. I encourage Congress to pass the Dodd-Frank financial reform bill and finally stand up to robber-barons of Wall Street.
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