Ten years ago today, Lehman Brothers collapsed.
It was the largest failure of an investment bank in decades – and the biggest bankruptcy in our country’s history. It sent a chain reaction through the markets that brought our economy to its knees.
In the months that followed, millions of hard-working people lost their homes, jobs, and life savings – all because of the reckless greed of the financial institutions that sold American families mortgages that were like grenades with the pins pulled out.
When those toxic mortgages exploded, Wall Street took a $700 billion no-strings-attached bailout from the American taxpayers and nobody went to jail for causing the worst financial crisis since the Great Depression.
After Congress passed the Dodd-Frank financial reforms in 2010, we made real progress. The Consumer Financial Protection Bureau took the consumer protection laws that had been scattered across seven different agencies and created a new agency with the tools, expertise, and responsibility for making sure that consumer financial markets worked fairly. Under President Obama and Director Rich Cordray’s leadership, that new little agency was a tough cop on the beat and forced the biggest financial services companies to return more than $12 billion to Americans who had been cheated on mortgages, credit cards, student loans, and other financial products.
But let’s get real: we still need stronger rules in place to stop another financial crisis in the future.
After the 2008 crash, the titans of the financial industry got bailed out because they were so big, their failures would bring down our entire economy. But many of the big banks are even bigger now than when we declared them “Too Big to Fail.” In fact, JPMorgan Chase is about four times bigger than Lehman Brothers was when it declared bankruptcy ten years ago today.
Before the ink was dry on Dodd-Frank, Wall Street jumped right back in and started working to undermine, pervert, or simply roll back the new rules. One lobbyist referred to the day Dodd-Frank was passed as “halftime” – and the big banks have been lobbying ever since.
Earlier this year, for example, Congress took 25 of the 40 biggest banks off the watch list, springing them from oversight that ensures they can survive a financial crisis. That same bill opened the door for big banks like JPMorgan and Citigroup to lower the capital requirements they need to have on hand to withstand a crisis. The Wall Street Journal editorial board – no fan of tough regulation – wrote that this change will “make the financial system more vulnerable in a panic.”
And then there’s Donald Trump.
Back in 2016, Candidate Trump made big promises to drain the swamp, ignore the lobbyists, and stand up to Wall Street. It’s clear now that those promises were just part of the scam – a scam that has paid off handsomely for Wall Street. President Trump has so many bankers in his administration that Goldman Sachs could open up a new branch at 1600 Pennsylvania Ave.
Donald Trump named Goldman Sachs President Gary Cohn as his chief economic advisor – but don’t think Gary Cohn took the job as his patriotic duty. Goldman Sachs handed Cohn $285 million on his way out the door to help quarterback the Republican tax scam. That tax package included giveaways worth over a quarter of a billion dollars to Goldman – in the first quarter of 2018 alone. Gary Cohn was working for Wall Street, not the American people.
Donald Trump also named former Congressman Mick Mulvaney to lead the Consumer Financial Protection Bureau – a guy who had called the consumer agency a “sick, sad joke.” In April, Mulvaney told a room of 1,300 bankers and reporters that he had a rule in his Congressional office: if a lobbyist didn’t pony up money for his campaign war chest, the lobbyist didn’t get a meeting. He said that right out in public with the press listening in, and Trump and pretty much every Republican in Washington just shrugged.
Mick Mulvaney fired the CFPB’s Consumer Advisory Board, Community Bank Advisory Board, and the Credit Union Advisory Board. He’s dismantled the agency’s student loans office and gutted the office that fights lending discrimination. And his protégé at the Office of Management and Budget – the person Trump has nominated to fill the CFPB director job, and who has no experience in consumer protection – proposed a 23% cut to the CFPB’s budget.
Why is this happening? Why favor the profits of Wall Street banks over the economic security of American families? The answer is pretty simple – corruption.
The way I see it, there are a few ways to fight back:
First, break up the big banks.
Cap the size of the biggest financial institutions. This was basically the law for most of the 20th century. Senator Sherrod Brown and former Senator Ted Kaufman tried to get this rule back during the Dodd-Frank debates.
And pass the 21st Century Glass-Steagall Act, my bill with the late Senator John McCain, to rebuild the wall between boring commercial banking and risky investment banking. If banks want to engage in high-risk trading, they can go for it – but not using insured deposits and not putting taxpayers on the hook. A new Glass-Steagall would shrink both size and risk.
Second, hold executives accountable for their banks’ actions.
In March, I introduced the Ending Too Big to Jail Act – legislation that would require senior executives at banks with more than $10 billion in assets to certify every year that they have conducted due diligence and found no criminal conduct or civil fraud within the financial institution. When Wall Street CEOs break the law, they should go to jail like anyone else.
Third, get the corruption out of Washington.
My new Anti-Corruption Act bans elected officials from becoming lobbyists after they leave office – so guys like Eric Cantor can’t do Wall Street’s bidding and then run to Wall Street when they lose an election. It ends pre-bribes like the Gary Cohn giveaway. It requires everyone who gets paid to influence the government to register as a lobbyist. It locks the revolving door by banning lobbyists from government jobs for six years. And ban lobbyists from writing checks or giving gifts to federal officeholders or candidates.
Ten years after the worst financial crisis since the Great Depression, our stock market is booming again – but that doesn’t mean a whole lot to the half of Americans who don’t own any stock. And it won’t mean a lot to anyone if we forget about what happened in 2008, gut the rules and fire the cops on Wall Street, and let the big banks go back to gambling with our economy.
Washington works really well for the billionaires and big corporations and the lobbyists. But what about the families who lost their homes or their jobs or their retirement savings when Lehman Brothers gambled big and lost? What about the families who are still living paycheck to paycheck and saw their tax dollars go to bail out Wall Street CEOs a decade ago?
It’s finally time for Washington to stop working for Wall Street and start leveling the playing field for working families.