Conyers calls for rebuilding financial regulations

U.S. Rep. John Conyers (D-Mich.), chairman of the House Judiciary Committee, had an op-ed column in the Detroit Free Press on Tuesday calling for the financial industry to be re-regulated in the wake of multiple scandals and trillions of taxpayer dollars being used to keep banking and investment companies from going bankrupt.

Noting that ten years ago this week Congress repealed the Glass-Steagall Act, a Depression-era law that kept banks out of the investment sector and vice versa. Calling that law “an important guard against financial instability and conflict of interest,” Conyers wrote:

Without Glass-Steagall serving as a critical check on the power of banks, the floodgates of speculation were opened. The banks leveraged personal savings accounts to trade in exotic securities and assets. Banks, insurance companies, and investment firms merged at an astounding pace. No longer content to simply finance home mortgages, these new hybrids began creating and selling securities based off of the speculative value of shaky mortgages. The banks took on more risk because risk was profitable. No one paid much attention to what would happen when the speculation bubble burst.

Now we know. Just as in the Great Depression, when bank investments in securities caused the market to fail, present day reckless investing caught up with Wall Street. Because the banks had become “too big to fail,” the American taxpayer was forced to step in and save the titans of capitalism from themselves, subsidizing the losses and privatizing the gains.

Conyers further argued that the Obama administration’s approach in negotiations over a new regulatory scheme, which relies upon having regulators determine a level of “acceptable risk,” is flawed and that they should instead focus on “correcting the structural flaws that make a collapse likely to recur.”

He cites several prominent economists who all agree that “some form of the Glass-Steagall firewall must be restored if the architecture of our financial system is to be sound.” And he pledged to introduce a bill to do that in the next few weeks. But unless the White House is behind the bill, it is unlikely that such a bill would get serious consideration.