At issue | Various news articles, columns on financial regulatory reform
During our economic crisis, Kentuckians have been forced to learn new ways to save, to cut down and to help their families make ends meet.
Wall Street, however, has learned absolutely nothing.
The same Wall Street banks that plunged Kentucky, the nation and the world into the worst economic crisis since the Great Depression are today acting as if nothing happened. They are posting record profits, taking on risky investments, expanding and again giving multi-million dollar bonuses to wealthy executives.
Even children learn that if they misbehave there will be consequences. But Wall Street learned that they are the exception to the rule — there are no consequences for them.
They defrauded the American people, caused a worldwide financial crisis and pushed millions of families into poverty. Their punishment? A $1 trillion taxpayer-funded bailout — which I strongly opposed and voted against.
If there are no rules, no consequences for causing a massive global economic crisis, and if there are bailouts when things go bad, what will stop these banks from causing another financial crash?
It is time that we let Wall Street know there are consequences for bad behavior. No more exceptions to the rules.
Today, the six largest banks (Morgan Stanley, Goldman Sachs, Wells Fargo, Citigroup, JPMorgan Chase and Bank of America) have total assets estimated to be worth over 63 percent of our nation's gross domestic product (GDP).
One thing I have learned from this financial crisis is not to keep all our eggs in one basket. We have to prevent a small handful of companies from controlling massive amounts of wealth which could cause another financial crisis if something goes wrong.
So with three other colleagues, I introduced the Safe, Accountable, Fair and Efficient (SAFE) Banking Act of 2010. Our bill would prevent any single bank from controlling more than 10 percent of our nation's total insured deposits.
The legislation would also cap a bank's liability at 2 percent of the national GDP (3 percent for non-banks) and create a 6 percent equity minimum for bank-holding companies.
In other words, it would clamp down on the six largest banks by shrinking them to a manageable size to regulate, limiting the amount of extreme risk they can take, and eliminating the need for bailouts — all while protecting our small community banks.
Local banks in Kentucky are the ones lending to small businesses that will create jobs. Their role in our economic recovery is very important, and we have to make sure any action we take protects them. Kentucky's small banks did not make the risky investments of Wall Street banks, and the vast majority of them are safe and sound institutions. Community banks did nothing wrong, and they should not be punished for the irresponsibility of Wall Street.
With this legislation, we may finally fix one of the major problems in the financial system: too much money in too few hands with no consequences. If they break it, they should fix it; and if they break the law, they should go to jail. It is that simple.
With Wall Street's new profits and new risky behavior, it seems it has conveniently forgotten that it ran to Congress hat-in-hand, pleading for help. They have also forgotten what they owe the American people.
People lost their life savings, their retirement and the ability to afford a college education all because big Wall Street bankers wanted to line their own pockets.
Wall Street might have forgotten, but Kentuckians have not. It is time to take action.