Want to Save Our Economy from Almighty Greed? Here Are 10 Crucial Fights and Key Fighters to Watch
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That's what Wall Street just did.
The way to fix this is to require companies to have lots of cold, hard cash on hand to keep them from destroying themselves if their bets don't pay off. This cash is called "stock" or "equity." Obama, Congress and the Federal Reserve have all been tight-lipped about how seriously they want to rein in leverage, but at the height of the crisis, banks like Citigroup were leveraged at more than 50 to 1: for every $50 in borrowed money Citi bet with, it had just $1 of its own money on hand.
Saying what the right leverage ratio is can be tricky, but 10-to-1 is the traditional range of safety.
5. Executive compensation. You're pissed off about the $26 billion Goldman Sachs plans to pay in bonuses this year, and you're right to be. Not only is this an obscene gesture in the face of 10 percent unemployment and an affront to the very taxpayers who saved every single job at Goldman Sachs last year, it actively harms the economy.
Ridiculous paychecks tied to short-term profits strongly encourage executives to behave recklessly: If the risk pays off, they make a lot of money for their shareholders. The average chief financial officer spends three years on the job. If they don't get rich quick, they don't get rich.
If the risk backfires, hey, they already made their millions. Think they're shedding any tears for their poor shareholders from their second houses in the Hamptons?
6. Elizabeth Warren. She's been following predatory lending for decades, and she knows every side of the issue you could think of. She knows what's driving foreclosures, what's causing bank failures and can critique complex accounting rules with the precision of a seasoned financial analyst.
As chairwoman of the TARP Oversight Committee, she has taken Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke to task for keeping bailout decisions secret. Best of all, she's an unapologetic consumer advocate who wants the banking system to work for the entire economy, not just Wall Street executives.
Her media appearances have built her significant political clout, and policymakers listen when she brings up concerns.
7. House Financial Services Committee. This is where most of the financial reform legislation starts, and it's where the most egregious Wall Street sell-outs have already taken place. The Republicans, of course, are shameless shills for the bank lobby, as are many conservative Democrats on the panel, such as Rep. Melissa Bean of Illinois. Even committed progressives like Committee Chairman Rep. Barney Frank of Massachusetts, and Rep. Brad Miller of North Carolina have been willing to sacrifice major reforms when cutting deals with the banking industry.
8. Pelosi. The speaker of the House knows how to get legislation passed. Everything that Bean and Frank screw up can be unscrewed on the House floor if Pelosi is willing to twist arms to do it. She rounded up the Democratic votes to pass the bailout in 2008, and she can get the votes to rein in Wall Street if she wants to.
The good news: She has made it clear that she views at least the CFPA as a top legislative priority.
9. Sen. Chris Dodd, D-Conn. No figure in Congress is more complicated than the senator from Connecticut. He brought you both credit card reform and the AIG bonuses. He is currently going to bat for you on abusive overdraft fees, but routinely shills for predatory payday lenders.
As chairman of the Senate Banking Committee, he has as much sway over financial regulations as anyone on Capitol Hill. He has been stalling for a long time -- Obama dropped his regulatory reform plan in June, and Dodd has yet to hold a single hearing to move a single proposal from the administration.