The wounds of 2008 may have stopped bleeding, but the scar is deep.  Congress must send a strong message that reckless financial practices at the peril of our economy will not be tolerated.  Emergency bailouts may have been a necessary action, but a lack of sensible banking reform has shown that our leaders have learned nothing.

The past few decades have been marked by improper regulation and deregulation, which allowed giant financial institutions to engage in questionable and risky behavior – such as betting on the value of derivatives and unstable mortgages.  These games at the expense of the American People must never be played again.

A Modern Glass-Steagall Act

I would support – and perhaps sponsor – a modern version of the Glass-Steagall Act to mandate the separation of commercial banking, investment banking, and insurance.  When a person makes a deposit, he or she should be comfortable in knowing that the money is safely kept and not used in risky investments.  Strict limits must be put on leverage and the trading of derivatives, and institutions deemed “Too Big To Fail” must be broken up.  No one entity should be able to bring down our entire economy pending a taxpayer bailout.

The Dodd-Frank Act was passed presumably with the intention of accomplishing these tasks, but has been regarded as a failure in the three years it has been in effect.  Many have stated that the Act does not do enough to prevent economic ruin, which may be due in part to the roles big banks have played in getting the law’s sponsors elected (Chris Dodd’s top donors can be found here and Barney Frank’s can be found here).

Recently, even the Dodd-Frank Act has been amended by congress to be even less effective, specifically related to taxpayers taking the risk for derivative securities gambles.  This was those main thrust of the law, but the change was made in the shadow of the “Government shutdown” debacle in a strategic move to pass unpopular legislation during a period of already cratering public approval.