‘Too Big to Fail’ Banks Need Tough Regulation
While the rescue of the nation’s top financial institutions was necessary, the rescue must be accompanied by strong action now to rein in the same institutions that caused the global financial crisis in the first place, several experts said today.
During a forum sponsored by the Economic Policy Institute (EPI), panelists pointed out that the nation’s four largest bank holding companies control nearly half of the bank assets in the country—almost double the amount they controlled in 2002—not a good situation for our economy.
The biggest threat: All these banks are carrying billions of dollars in bad debts. Their weak balance sheets make them hesitant to lend—the so-called zombie bank phenomenon. But their financial weakness is paired with political power, power that may not be consistent with our democratic principles, says Damon Silvers, deputy chair of the Congressional Oversight Panel (COP).
Bailout Oversight Panel: Some Banks Still Vulnerable to Collapse
Nearly a year after the $700 billion bailout of the nation’s financial system began, banks—especially regional and smaller banks—are still threatened by the billions of dollars in bad loans on their balance sheets. More could fail if the economy worsens, according to a new report from the Congressional Oversight Panel (COP), which oversees the spending of the bailout funds.
“The Continued Risk of Troubled Assets,” released today, warns that if unemployment rises sharply or the commercial real estate market collapses, the banking system could again nosedive into a crisis.
In the report, the panel says:
The financial system [remains] vulnerable to the crisis conditions that [the bailout] was meant to fix.
Bailout Oversight Panel: Bank Stress Tests Don’t Go Far Enough
The federal government’s recent stress tests of the nation’s largest banks generally were well designed, but they did not go far enough or raise some serious concerns. The tests may need to be repeated often, according to a congressional panel overseeing the $700 billion financial bailout.
Testifying before the Joint Economic Committee (JEC) this morning, Congressional Oversight Panel (COP) Chairwoman Elizabeth Warren said the stress tests were based on assumptions about the economic downturn that may be too optimistic. The COP released a new report today that calls for more strenuous and transparent testing of the banks until the current economic crisis is over.
Bail Out Average Americans, Not Bankers
Behind all the hype and technical jargon surrounding the nation’s banking and mortgage crises, the bottom line comes down to answering this question: Does the nation want to spend its resources on rich bank stockholders or on roads, bridges, schools and other necessary projects?
Speaking during a workshop at the America’s Future Now conference this morning, several members of a panel on the banking crisis said the financial system is broken and that the Obama administration’s plan to fix it doesn’t address the scope of the problem. The three-day conference is sponsored by the Campaign for America’s Future.
(Click here to read more news and views from the America’s Future Now conference. You also can listen to the conference sessions live on BlogTalk Radio here.)
The administration is holding its breath, hoping big banks will recover the value of some of their assets over time if taxpayers bail them out over the short haul, said Damon Silvers, vice chairman of the Congressional Oversight Panel.
Educating Timothy Geithner: The Congressional Review Panel on Capitol Hill
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The American people worry about how their $590 billion in taxpayer money is being spent in the big bank bailout—and, on Capitol Hill today, U.S. Treasury Secretary Timothy Geithner was told why. In his first appearance before the Congressional Oversight Panel (COP), which has spent nearly six months reviewing the expenditures of the Troubled Asset Relief Program (TARP), COP chairwoman Elizabeth Warren told Geithner:
People are angry that even if they have paid their bills on time consistently and never missed a payment, their TARP-assisted banks are unilaterally raising their interest rates or slashing their credit lines….People are angry when they read headlines of record foreclosures because even if they aren’t personally facing trouble with their mortgages, they see their own property worth less and their communities declining as a result of the foreclosures all around them.
I appreciate your repeatedly stated commitment to transparency and accountability…but more remains to be done. People need to understand why you are making the choices you are making.
Banks Need Restructuring, Not Bailouts
The Treasury Department’s bank bailout plan is built on the faulty assumption that the financial crisis is the result of a temporary lack of a market for current financial products—and presumes the losses can be made up after confidence in the system is restored. The reality is that the entire financial services industry needs to be restructured and the sooner, the better, two experts said recently.
Writing at the Campaign for America’s Future website, Susan Ozawa points out that during a recent conference, Damon Silvers, vice chairman of the Congressional Oversight Panel (COP), and economist Robert Kuttner said broader and deeper changes need to be made than the Treasury plan envisions. They spoke April 8 at the “Lifting the TARP: Is a Reconstruction Finance Corporation a Better Way to Restore the Banking System?” conference sponsored by Demos in Washington, D.C.
‘It’s Time to Regulate All Global Financial Markets’
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The global financial meltdown demonstrates the need to regulate all international financial markets, not only the important institutions, says Damon Silvers, vice chairman of the Congressional Oversight Panel (COP). The COP is examining how the Treasury Department is spending taxpayer money to help rescue the financial system.
Speaking yesterday at The Wall Street Journal’s Future of Finance Initiative, Silvers said the overhaul of the global regulatory system should be comprehensive.
All forms of money management in global markets ought to be under a regulatory scheme. Not just systematically significant ones, all of them. Otherwise, we ought to just basically admit that we don’t have regulated markets.
Obama Calls for Credit Card Protections
President Barack Obama said yesterday the nation needs tougher laws to protect consumers who use credit cards. Replying to a question at a town hall meeting in Costa Mesa, Calif., Obama pointed to a study by Elizabeth Warren, a Harvard professor and chairwoman of the Congressional Oversight Panel (COP).
There’s a woman named Elizabeth Warren…who did a great deal of study around this. And she made a simple point…if you bought a toaster, and the toaster blew up in your face, there would be a law, a consumer safety law, that would protect you from buying that toaster. But if you get a credit card that blows up in your face, that starts off at zero-percent interest…and suddenly, it’s 29 percent; and if you’re late two days, suddenly you just paid another $30—well, somehow that’s okay.
I think generally having some consumer safety, some consumer protection around credit cards, is important.
Obama was referring to one of the COP’s recommendations to Congress in its recent report on the need for regulatory reform of the financial system. Those recommendations reflect many reforms proposed by the AFL-CIO.
Here’s Why U.S. Job Loss Worse, Wider Than Previous Recessions
The current economic downturn is the worst since the Great Depression and has led to more job loss than the previous two recessions. Just as in the 1930s, today’s economic crisis was triggered by a banking failure created in large part by financial degregulation. Both jobs and a stronger financial system must be addressed to prevent future problems, say two union leaders key to solving the crisis.
In a recent interview with National Public Radio (NPR), AFL-CIO Secretary-Treasurer Richard Trumka, a member of President Obama’s White House Economic Recovery Advisory Board, pointed out that the current recession is worse than the recessions of the mid-1970s and early 1980s when it comes to job losses. Says Trumka:
This recession began in December of 2007, and we’ve already lost more jobs as a percentage of total employment than in the entire ‘73 or ‘80-’81 recessions.
Time to Restructure Mortgages, Bank System
The home foreclosure crisis and the implosion of the nation’s banking system are so closely linked the federal government must address both at the same time—and time is running out, says Damon Silvers, a member of the congressional oversight committee examining how the U.S. Treasury Department is spending taxpayer money in the Troubled Assets Relief Program (TARP) to help bailout the financial system.
At a field hearing of the Congressional Oversight Panel on Friday in Prince Georges (P.G.) County, Md., Silvers, who is associate general counsel of the AFL-CIO, pointed out that policymakers seem to forget that what happens on Main Street affects the rest of the world.
