Reform Must Hold Wall Street and Washington Accountable
As the Senate considers Senator Dodd’s financial regulatory reform legislation, I am concerned they are ignoring the major role the federal government played in the run-up to the financial crisis. While I agree that certain players on Wall Street can and should share blame, the biggest culprit is the federal government and its failed regulatory regime.
The bill does not adequately address the problem of “too big to fail” firms, leaving the door open to future bailouts. Meanwhile, the legislation does nothing to reform Fannie Mae and Freddie Mac, the Government Sponsored Enterprises which are responsible for the majority of taxpayer money lost in the bailout. As the Wall Street Journal has noted, “[Fannie Mae, Freddie Mac,] and other government entities were responsible for more than $2.7 trillion in subprime and Alt-A exposure.” Their reckless behavior precipitated the financial crisis.
Real reform must address this problem, not exacerbate it by increasing the government’s role in the market. House conservatives have crafted legislation that would phase out taxpayer subsidies of Fannie and Freddie, resolve large failing firms through bankruptcy, and hold both Wall Street and the federal government accountable. I believe these reforms are necessary to end the era of bailouts and usher in new era of responsibility.
