Reid Cramer, Mother Jones
The next big battle in Washington—one that will heat up fast if the health care tussle is ever resolved—will be fought over reform of the financial sector. In recent weeks, President Barack Obama has gone on the offensive, calling for new restraints on Wall Street wheeling and dealing and vowing to veto weak legislation. In December, the House passed a robust package of reforms. The action has now shifted to the Senate Banking Committee, and chairman Sen. Chris Dodd (D-Conn.) has pledged to push a comprehensive package over the finish line before he retires at the end of the year. But it won’t be easy. The big banks and their lobbyists are vigorously resisting a rewrite of their operating rules and working hard to insert loopholes and exclusions that would gut the legislation. Obama can prevent that from happening by spelling out the benchmarks the legislators must meet to avoid his veto pen. The details of financial reform can be complicated. But it’s not hard to come up with the must-have provisions. Here are five that the White House should insist upon to make sure we get financial reform that works, not just window dressing.
1) Fix the big picture, not just individual firms.
We learned the hard way that the possibility of failure is an essential pillar of a stable financial system. When firms become “too big to fail,” they take excessive risks, crowd out smaller firms, and are costly to bail out—and the failure of one can threaten the whole economy. Successful financial reform would include a mechanism to survey the balance sheets of particular firms according to the risks they pose to others, not just to their shareholders or depositors. Currently, no single entity is assigned to ensure system-wide stability and detect excessive risk taking. There must be an agency with the authority to monitor threats to the marketplace and prevent the failure of any individual firm from having a cascading effect. Europe is on a path to create a Systemic Risk Board, comprised of the national central banks, to perform this function, and the United States ought to follow suit.
Read more here: http://motherjones.com/politics/2010/03/obamas-financial-reform-do-list
