Mistakes Of Banks Transferred To Taxpayers

Floor Speech

Mr. Speaker, the conventional wisdom flowing through the media to our Nation is that without the Wall Street bailout, America would have gone into economic depression and many banks would have failed. Well, the bailout passed. But think about it, then America fell into depression. Unemployment skyrocketed, and since January of last year, 141 banks have failed and been resolved through the Federal Deposit Insurance Corporation with more to come. Yet the biggest banks that did the damage were rescued rather than broken up and held accountable. These big banks gambled wildly, taking huge risks with our money and our mortgages, and now they are transferring their trillions of dollars of mistakes to our taxpayers for generations to come. What's wrong with this picture?

The public's anger is rising, rightly. That can make a difference because that will affect elections. Yet the powerhouses of Wall Street who took TARP money within a year are earning the strongest profits in America compared to every other business, and they are handing themselves exorbitant bonuses, over $150 billion and counting. Clearly what Congress did was incorrect.

America has fallen into a deepening depression, more unemployment, with projections for a jobless recovery, with rising trade deficits, which weren't supposed to happen because of the value of the dollar. Why? Because the financial crisis was resolved in the wrong way. The financiers who created this house of cards are still rewarding themselves and doing a reverse Robin Hood--taking from others to reward the privileged few. That doesn't sound like the America I know.

Credit remains frozen across our country. Credit being frozen means no more jobs. It means jobless recovery, because businesses cannot make payroll. They cannot buy supplies. They cannot maintain their inventories. When five megabanks in our country control nearly half the deposits of the American people, that is too concentrated. It is too unaccountable. And it is too much of a transfer of power from the many to the few. That isn't what America is about.

Alone, or joined together in groups, these big banks successfully lobbied Congress to weaken financial regulatory reform and defeat one of the most powerful and necessary reforms rebuilding the protective walls between regular, prudent commercial banking and speculation. Financial reform should have deconstructed the too big to fail firms that caused this economic crisis, but the bill that whizzed through this Congress a few weeks ago did exactly the opposite. It enshrined them, it grandfathered them.

I introduced H.R. 4377, called the Return to Prudent Banking Act, which would restore the Glass-Steagall protections, which were overturned a decade ago in a bill called Gramm-Leach-Bliley that sailed through this Congress. Our bill would restore the barriers between commercial banking and speculation, not allowing this transfer of power to the abusers.

I look forward to working with my other colleagues, like Congressman MAURICE HINCHEY of New York, such a leader on this issue, to combine our bills, to return our financial system to a prudent banking system, one in which credit is no longer seized up because we fixed what is wrong with the fundamentals.

Our citizens demand a more competitive banking system, one that is less concentrated, and without the systemic risks our current one encourages. The momentum is building for real change, and I am glad there is an election this year. Because despite the work of the megabanks to enshrine themselves, we still have hope because more Americans are paying attention.

There is an article in the Wall Street Journal today by Thomas Frank entitled Bring Back Glass-Steagall. He is right. The so-called financial regulatory reform bill that moved through this House too quickly last year before examining the root causes of this crisis has a bottom line. The House bill basically grandfathered the megabanks, which set the stage for a future meltdown in our economy because the Federal Government becomes the open arms for Wall Street's high risk future behavior. The big banks of course will fight any effort to reform the current system, but speculators shouldn't be given free rein. They have to let the American people know that in fact if they are high risk, hey, you are on your own. But those firms should not be allowed to gamble with regular commercial banking.

The American people should think about how to restore normal credit flows, because until we do that this economy is not going to heal.

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