10 Steps to Disastrous Financial Reform We Can't Allow the Government to Take

By Tiffiniy Cheng, AlterNet. Posted September 22, 2009.

The economic crisis was not the result of just a “moral hazard”  problem. Many economists agree there was a culture and a system to the reckless behavior. President Obama and Congress vow to address the economic crisis in the coming months.

Financial sector reform is a chance for us to think about how we can reshape our financial system to benefit the overall economy rather than the individual large banks we have been serving for the past 30 years. On the side of the public, there are 10 upcoming Decisions to fear -- together they can kill our hope to de-emphasize singular corporate interests in policy making. 

If all 10 Decisions happen, the largest banks will be even mightier and our economy will work for single institutions at the top of the pyramid rather than the pyramid as a whole. The public will be lost for a good 10-20 years, having ceded much of any power to fight for our own interest. We've lost just one of the ten so far, 9 more are yet Undecided.

Our goal in an economic recovery should be to make happen the kind of bank reform that will really give us freedom to live with economic security and opportunity for all, equal access to financial products and the financial market without corporate hegemony, corruption and unstable giant corporations. The kind of bank reform we need will actually uproot the way banks have come to dominate our rationale and subsequent policies.

Decision #1 Congress expands the Fed's powers

The current seat of power, the Federal Reserve watches over the banks and the economy, but has recently failed to protect taxpayers.  The Fed worked with the banks to inflate bubbles and co-founded the biggest crash since the Great Depression.  Central to Obama's proposal for reform is to expand the powers of the Fed by making them the "supercop" for system-wide risk in the economy. The Fed does not deserve these new powers - we shouldn't reward their failure, prop up these avenues of corruption, and sanctify endless taxpayer-funded bailouts. If we officially designate the Fed as the SSR, we'll give the banks ultimate abilities to write their own rules. In addition, the Fed is allowed to operate in secrecy and in the past year has guaranteed loans in the trillions without any public approval. If the Fed is not audited, it will continue to have too much power as a taxpayer-funded agency to operate as they wish with no accountability to the public.

Status: Undecided

Decision #2 Investigations Become a Smokescreen

Congress has set up a Financial Crisis Inquiry Commission and has chosen its 10 members. The best hope for the commission is that wrongdoers of the crisis will be exposed and justice served; the worst scenario is the commission does nothing in order to protect the largest banks. We must police these investigators and support the most aggressive seekers of truth. Phil Angelides, Brooksley Born and Byron Georgiou are expected to be fierce investigators; other members are Bill Thomas, John Thompson, Bob Graham, Heather Murren, Peter Wallison, Keith Hennessey and Douglas Holtz-Eakin. 

Status: TBD

Decision #3 Corporate Dollars Allowed into Direct Political Advertising

The Supreme Court recently revisited a case relating to whether or not corporate dollars can go to pay for ads in the days leading up to an election (based on the "Hillary" movie case Citizens United vs FEC) but have not yet decided corporations can play this role in elections or if McCain-Feingold campaign finance can go away altogether. 5 of the 4 Justices went as far as to say that corporate dollars are equal to free speech. The problem with this articulation of large piles of money is that it disregards the fact that they are helping the paid media kind of free speech trump any other form of speech; they are saying that corporations can have more free speech than regular people without that kind of loot; money should be able to determine politics leaving one person one vote as a nice thing in theory; and money should determine who is best heard when it comes to political elections. Free speech referred to in the Constitution is the kind we all care about and is not quite the kind that is enabled by large piles of money, by the way. The problem this Decision presents for financial reform is that because large financial corporations have more money than the middle class to give to elections, these corporations have a greater ability to elect someone who works in their interest over ours.

Status: Undecided

#4 Members of Congress Turn out to be Antireform Leaders

Senator Dodd chairs the Senate Banking committee and also is taking a lead on the healthcare bill, while Barney Frank proves to be a tepid chair of the House Financial Services Committee. These committees must be held accountable to working in the interest of financial security from the bottom up.

Status: Undecided

#5 Too-Big-to-Fail Is Out of Sight

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Tiffiniy Cheng co-founded and directed the most popular government accountability website and nonprofit, Open Congress and has worked on financial sector analysis and reform through projects like A New Way Forward. She organized educational economic forums on too-big-to-fail with economists like Simon Johnson and Ernesto Dal Bo, and has written on the topic of structural reform of the financial sector. Tiffiniy also co-founded a nonprofit organization working on creating more access and participation in the new media industry.

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