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Five Ways the Wall St. Reform Bill Needs to Be Fixed

The Wall Street reform bill in Congress won't live up to President Obama's goals -- unless we can push them to change it.

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So Volcker wanted to ban dangerous speculation by cracking down on "proprietary trading"--pure bets that are unrelated to serving any clients a bank works with. The trouble is, proprietary trading that Volcker targets is very difficult to distinguish from other "client-related" trading, and in many cases, client-related trading is just as dangerous.

We need to go further. For more than 50 years, the Glass-Steagall Act banned banks that accepted deposits from playing around in the securities markets in any way, whether for clients or themselves. During that time, there were zero financial crises. For anybody eying bipartisanship, John McCain is a co-sponsor of this amendment.

4. Crush the Casino: Blanche Lincoln's Derivatives Bill

Derivatives are extraordinarily dangerous. They brought down AIG, and AIG nearly brought down our economy. The market is huge--the trading value of derivatives is $3.3 trillion, and the contracts bet on $500 trillion worth of stuff. A whopping 96 percent of this market is housed in just five banks.

What's worse, three of the biggest derivatives dealers -- Bank of America, Citigroup and J.P. Morgan Chase -- are commercial banks, the kind that accept deposits, make loans and form the core of the payments system. Commerical banks like to back derivatives, because federal deposit insurance gives these companies stronger credit ratings, which makes their risky bets appear less risky to investors. And in fact, they are less risky for investors--because taxpayers like you and me are protecting them. So Blanche Lincoln, D-Arkansas has pushed a bill that would ban banks from dealing derivatives. Bravo.

Lincoln also wants to make sure derivatives are traded on exchanges, where everyone can see what risks everyone else is taking on, and her bill has the strongest language on this requirement of any proposal in Congress. Sunshine really is a good disinfectant-- nobody would have traded with AIG had they seen the trillions of dollars in subprime mortgage risk the company was loading up on.

5. Audit the Fed: The Bernie Sanders Amendment

Speaking of sunshine, the Federal Reserve has pumped out $4.7 trillion in bailout money for the financial sector over the course of the crisis, and refuses to tell the public who is receiving that money and on what terms it is being extended.

Reps. Ron Paul, R-Texas and Alan Grayson, D-Florida, authored legislation requiring a full audit of the Fed's activities and it passed the House in December with loads of bipartisan support in December. Sen. Bernie Sanders, I-Vermont, plans to offer the same amendment in the Senate. It's our money. We deserve to know where it's going.

Zach Carter is an economics editor at AlterNet. He writes a weekly blog on the economy for the Media Consortium and his work has appeared in the Nation, Mother Jones, the American Prospect and Salon.