Rep. Foster Supports Wall Street Reform

Press Release

Makes Important Contributions to Protect Consumers and Restore Accountability to Financial Institutions

Today, Rep. Bill Foster (IL-14) voted to pass legislation that would reform how business is done on Wall Street, instituting new rules that will crack down on risky financial practices, enhance accountability and transparency for financial institutions and create a Consumer Financial Protection Agency to help families and small businesses.

"The financial crisis cost our economy more than 8 Million jobs, and cost American families over 17 Trillion dollars of net worth. There is no more important task before us than to put sensible rules of the road in place so that this sort of crisis does not happen again," said Foster.

"I will never forget the day two years ago when Hank Paulson and Ben Bernanke appeared before our committee and warned us of a total economic collapse unless we promptly authorized hundreds of billions in taxpayer dollars to stabilize the financial system," said Foster. "Although the threat was real, I vowed to myself that no Member of Congress should ever be placed in that position again, and I am proud of the work we have done in the Committee to craft legislation that will strengthen the system, protect the taxpayer, and prevent this sort of economic crisis from happening again."

The vote comes after weeks of negotiations in the Conference Committee to reconcile the House passed and Senate passed bills. During the Conference, the Chairman of the House Committee on Financial Services asked Foster to address the Conference on the subject of contingent capital, one of Foster's top priorities in the legislation, due to his expertise on the subject.

"Contingent capital is a private sector, market-based solution to prevent large financial firms from endangering the public. It represents an important new tool to help avert a crisis before it starts, and better manage a crisis once it has begun," said Foster.

Contingent capital requirements force large financial institutions to carry part of their debt in a form that automatically converts to equity if the firm becomes distressed. This recapitalizes the firm without putting the taxpayer on the hook, and without the market chaos that the bankruptcy of a giant firm would create. Thus it can be thought of as a requirement that large financial firms carry privately funded bailout insurance.

"I was gratified that, despite initial skepticism from both sides of the aisle, my amendment authorizing contingent capital requirement was included in the House-passed legislation as well as the final compromise with the Senate. I was also gratified that after we passed the contingent capital amendment in the House, when the Wall Street Journal assembled a panel of experts to identify steps to rebuild the financial system, their number-one priority was improved capital requirements including contingent capital for large financial firms." (Wall Street Journal, 12/14/09)

The House-passed and final conference committee bill also included a number of other Foster-authored amendments on a wide range of technical subjects. These include improved derivatives regulation, counter-cyclical capital requirements to force Banks to reserve more money during good times to prevent them from failing in downturns, regulations to help uncover Bernie Madoff style Ponzi-schemes, and a study on the optimal risk retention requirements in mortgage securitization to help ensure a more stable real estate market in the future.

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