We believe that any efforts made on financial reform must ensure:
- A safe and sound commercial banking system.
- A finance sector that is transparent and adequately capitalized, allows for the correct pricing of risk, and efficiently and effectively allocates capital into the nonfinancial economy to support productive economic development.
- The elimination of risks associated with Too Big To Fail.
- Restriction of insurance derivatives and market making that provide nothing of value to the larger society.
Regarding the current financial reform bills in Congress, we believe the following issues are most crucial to achieving our stated goals:
- End Too Big To Fail – Impose size limits on bank’s assets.
- Limit Banking Risk – Banks with deposit insurance protection should be prohibited from engaging in risky activities such as proprietary securities trading and hedge fund investments. Set more conservative capital reserve and leverage requirements for all types of banking and investment firms.
- Regulate Derivatives – Enforce transparency in derivatives trading and outlaw synthetic derivatives and naked CDS positions.
- Create a Freestanding Consumer Financial Protection Agency – Give them rule-making and enforcement authority.
- Create Resolution Authority – Create a system for processing orderly bankruptcies that includes a resolution fund paid for by large banks.
- Change the Rating Agencies’ Compensation System – Remove the inherent conflict of interest when rating agencies are paid by the companies seeking the ratings.
- Enforce Sarbanes-Oxley Rules for Accurate Corporation’s Financial Statement – Forbid hiding risks from balance sheets.
- Hold Regulators Responsible for Enforcing Regulation – Clearly delineate their areas of responsibility and do not allow financial institutions to choose their regulator