In this season of list making and gift-giving, US Senators Sherrod Brown and George Voinovich should do their part by making a list of changes needed to the recently-passed House bill on banking reform – which provided many plump presents to banksters and the financial industry.
In the spirit of the 10 days of Christmas (sincere apologies to non-followers of the Holiday), here are 10 suggestions that Senators Brown and Voinovich should add to their list…and make sure to check twice…before sliding down the Congressional chimney onto the Senate floor to argue on behalf of taxpayers and citizens.
1. Cap bank size. Banks too big to fail are too big to exist. Period. The five largest financial institutions, among the major players in the financial crisis, hold about 50% of all deposits and 95% of all derivatives in the US. The House bill provides a cap but none of these would be affected. The cap should be drastically lowered. The largest banks should be broken up. Sherrod and George should lock arms and like any good holiday chorus sing in harmony, “Chop from the top!”
2. Revoke corporate charters of banks. The stories have been legendary – the banking corporate Scrooges received tens of billions in public bailout money but didn’t do what they were supposed to – make loans. Instead, they gave themselves bonuses and bought other banks, making them even too bigger to fail. Are you kidding me? Enough! My hunch is that most bank charters somewhere say that at least a teeny weenie part of their mission is to make loans. Banks that failed to fulfill their mission should have their charters revoked and put out of business. While Sherrod and George might shiver as if caught in a cold winter’s wind at the prospect of such a radical notion, they should be reminded that corporate charter revocation has a rich tradition in Ohio. It was, after all, 2 REPUBLICAN attorneys general more than a century ago that sought to revoke the Standard Oil Corporation (the largest corporation of its day) for violating the terms of its charter. Ohio courts and the legislature revoked dozens of other corporate charters. The same call…and follow through…should be made from the Senate floor.
3. Federal take-over of insolvent banks. Banks shouldn’t be bailout out but taken over. The post Savings and Loan debacle era resulted in the Prompt Corrective Action law (US Code Title 12, Chapter 16, Sec 1831o) REQUIRING insolvent banks be taken over to protect taxpayers. Both the Bush and Obama administrations have simply ignored the law. Isn’t it time to enforce a law already on the books that if followed would have saved taxpayers tens of billions of dollars?
4. Create a federalized system of banks. This is controversial to those who believe the government shouldn’t be involved at all in the banking business. Ellen Brown in the Web of Debt presents a strong case, however, for the creation of local branches of a federalized banking system. The branches could come from FDIC takeover of insolvent banks. She says these banks could serve both depository and credit needs. Interest rates would be less (or none at all) than those under corporate, for-profit banks. If interest in charged, some of it after expenses would go the US Treasury to be used in place of taxes.
5. No 5 golden rings…or golden parachutes to banksters. Banks that received bailout funds of any form of public support shouldn’t be allowed to provide their executives any pay raises.
6. Jail for those responsible for financial crisis. It was reported this week a man was sent to prison for 4 years for stealing $5. How much time has anyone served for stealing from taxpayers, pensioners and homeowners trillions of dollars? Where has the Justice Department been? The Senate should call for investigations and prosecutions.
7. Eliminate fractional reserve lending of banks. Banks now can lend many times more than what they actually have in their vaults. This means default of only a small percentage of loans result in an inability of banks to cover their losses –resulting in bank insolvency. Increasing reserve requirements to 1:1 (meaning banks can only loan out what they actually have – what most people probably believe is how banks work) would end this nonsense.
8. Separate boring commercial from exotic investment banking. The financial firewalls contained in the 1932 Glass-Steagall Act, passed after the stock market crash but repealed in 1999, need to be re-imposed.
9. No loopholes on derivatives. None of the $680 trillion worth of derivatives should be exempt from transparency and regulation. A modest tax on each speculative transaction could generate over $1 trillion. Purely speculative derivatives should fall under state gambling laws. On the other hand, banning derivatives altogether, at least the most speculative ones that are nothing more than flat-out gambles, would be a swell gift under our national economic tree.
10. No regulatory powers for the Federal Reserve. The quasi-private Fed regulating private banks is a profound conflict of interest. How is providing regulatory authority to an entity hostile to previous regulations which allowed the financial industry to engage in their speculative rampage a “reform”?
Changing the House-banking bill in these ways wouldn’t completely transform the financial system from being naughty to nice. It would, however, protect taxpayers, strengthen the economy and protect, if not expand, what left of our democracy.
Call Senators Brown and Voinovich
Sherrod Brown DC 202-224-2315 / Cleveland 216-522-7272
George Voinovich DC 202-224-3353 / Cleveland 216-522-7095