Reg Reform Bill Slammed By Dem Insiders, Economic Experts In Reid Letter (EXCLUSIVE)

A coalition of former regulators, left-leaning economists and Democratic insiders have slammed the Senate's version of regulatory reform in a letter to the parties' two leaders, warning that the current bill won't prevent a future financial crisis.

In a letter addressed to Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.), 36 highly respected officials, including former Labor Secretary Robert Reich, and longtime Democrat and Obama adviser Leo Hindery, paint a dire picture of the state of legislation to fix Wall Street.

"Nineteen months after the most devastating financial crisis since the Great Depression, our financial system remains at risk," they write. "Neither the bill passed earlier this year by the House, nor the one currently under consideration in the Senate would have prevented the crisis. Without serious restructuring, they will not prevent a future crisis."

The signatories, which include former SEC Chief Accountant Lynn Turner, former Lehman Brothers Vice Chair Peter Solomon, former S&L investigator Bill Black, and former Senate Banking Committee Chief Economist Rob Johnson, cast blame for the buildup to the 2008 crisis on both parties. But the solutions, they insist, shouldn't be piecemeal. "At a minimum," they write, new rules guiding Wall Street practice should be guided by the principle that, if they had been in place at the time, they would have "prevented the crisis we just endured." The ones being considered fall short of that aim, they concluded.

The group goes on to list eight specific changes that "must" be included to make the bill being considered by the Senate acceptable. Some of them are broad -- and, Senate negotiators would argue, are already addressed in their bill. Others, however, are quite specific. And it will be telling to see which, if any, senators try to change the legislation around these principles when (or if) the bill comes up for amendment on the floor.

As it stands now, Republican lawmakers are insisting they can't support legislation without changes to its language. And at least rhetorically, the GOP has sounded alarms that the bill doesn't go far enough to prevent government intervention in future economic catastrophes. At the same time, however, McConnell and others have opposed reforms that they argue will hurt economic activity domestically (including tough restrictions on how derivatives are traded). So it's hard to imagine them considering any of the below suggestions put forth by the letter's signatories. Some of the suggestions, indeed, have critics within the Obama White House.

The eight suggestions are listed in the letter, below:

RegReformLetter

Comments

[TN60]

11:05 AM on 04/22/2010

Sorry, but I don't agree......make that a loud I DON'T AGREE... that both parties are to blame. Whoever said "The Lost Decade" of Bush.Republican Rule, had a mouthful of Truth behind him.

It wasn't Democrats who bled jobs by the millions during Bush and the Republican Rule.

It isn't now, Democrats trotting up the worn path to Wall St. by McConnell and the (R) Senator who runs the re-election of (R) Senators. It wasn't (D)s who told Wall St. "NOT to give into the Bullies in Congress" by old Orange Glow, himself.

It was, however, a Democrat who said the whole Senate is owned by Wall St.

The November election is simple:

Republicans = "Protecting Wall St.

Democrats = "Protecting Main St."

Just don't blame the Democrats.... for not creating a single job under Bush/Republicans or all the other mess from 1994-2007, called free market, free for all, trickle down voodoo crappola.

And.....once more, THESE SAME REPUBLICANS still sit on their lofty perches today, and plot how to destroy Obama and finish destroying this country from one end to the other.

Wake up America. Re-hiring these Rethugs will mean going back to the "Dark Ages" we lived under Bush/Republican Rule.

[tompoe]

04:56 AM on 04/22/2010

Are these the same regulators, economists, and insiders that quietly stood by as the Republicans raped and pillaged our country for almost a decade? Or, did they just change their previous letters from future tense to past tense? They have been sounding the alert all these years, right?

[vinny]

03:40 PM on 04/21/2010

obama cultists will support anything MSM tells them to, they'll spend all their time railing against Rs and their obviously insensible positions, and never once think critically about what it is in the legislation that they are defending... they'll argue for pragmatism and small step, rather than for doing the right thing...

this happened in HC debate, and we are seeing it happen again with finance reform...

[tompoe]

05:01 AM on 04/22/2010

Vinny, there is no MSM. There's corporate media. Are you suggesting Obama cultists support anything corporate media tells them to? I'm glad to see you recognize that Rs have nothing to contribute but insensible positions. However, thinking critical is something Obama cultists do very well, as opposed to the Party of Corporate Welfare, that can only shriek the mantra, NO.

[TN60]

10:47 AM on 04/22/2010

Good comments, tom. Right on. Thanks

[tweedledeedumb]

09:21 AM on 04/21/2010

Give the Tea partiers guns and tickets to DC. Time for a reckoning.

[1differentdrummer]

06:09 AM on 04/21/2010

Love the picture. Flags on uniform jackets. Nice touch.

[Return2Sanity]

11:44 PM on 04/20/2010

Barry Ritholtz has a copy of this letter on his blog that you can sign electronically:
http://www.ritholtz.com/blog/2010/04/an-open-letter-to-senators-reid-and-mcconnell/

If we, the people, do not demand strong and meaningful financial reform, Wall Street will continue to step in and weaken the legislation so that they can go on playing their games with our money.

[Firbolg]

01:05 AM on 04/21/2010

I seem to remember, way, way back in early 2009, the same activity being suggested about healthcare reform.
It did no good then. Why should it work now for financial reform?
Have we all forgotten the definition of insanity?

[James Croteau]

04:44 AM on 04/21/2010

afraid you are so correct. I guess it like doing the same thing twice, and expecting opposite results.

[crease]

11:31 PM on 04/20/2010

Until we get campaign finance reform we not climb out of this hole.Congress is bought and sold and unfortunately Obama has to go along for the ride.These greedy all to powerful bastards on Wall St will never relent until "we the people"take to the streets and protest if full force and NO I am not a T Bagger I am a full blooded Union man that is watching us go down the crapper while we bicker over who is responsible for this mess,in my view it is us "We the people" who are responsible for letting this happen and it will only get worse unless we get out and protest against Wall St and our Gov't that is being corrupted by GREED and the POWER that accompanies it.

[MekhongKurt]

05:12 AM on 04/22/2010

crease, please define what you mean by "take to the streets and protest." (I personally don't think that's the only option left to us, however we define it, but never mind.)

IF you mean a group of like-minded citizens gathering to march carrying signs, chanting, singing songs, handing out brochures, bumper stickers, lapel pins, stuff like that which explains their specific complaint, fine.

IF, however, you mean a protest in which a group of armed citizens, their weapons loaded, get together -- absolutely not. I have seen the protest the other day described as "peaceful."

BS. Armed people do NOT project an image of "peace, love, and brotherhood, Brothers and Sisters."

By the way, I felt exactly the same way 40 years ago when various leftist groups took to the streets to "peacefully" demonstrate -- with molotov cocktails, iron bars, and, yes, sometimes guns.

[jcd8822]

10:30 PM on 04/20/2010

When it comes this particular subject I have to admit I am not the brightest bulb on the tree.

What I do not understand is that if all of these "former" whatevers who sent the letter are so correct in what they say, why did they not do a better job when they were up to bat?

[hillarysupporter]

11:41 PM on 04/20/2010

Ask Obama why he voted Against financial reform in 2005 when he was a Senator. Is it because
it wasa Republican bill?

[James Croteau]

04:48 AM on 04/21/2010

Don't remember the Bill, did it pass the republican controlled congress? Just maybe it wasn't real reform, for if it passed, it surely didn't help the current problem.

Give us a Link and the Bill #

[valkayec]

09:38 PM on 04/20/2010

Everyone:

In addition to sending the letter to your Senators, forward a copy of it to everyone you know, and ask them to sign a similar or better letter to be sent to the Senate leadership.

Make this a citizens campaign for much better legislation. Otherwise, an already weak bill will become weaker and leave this nation open to the same kind of crisis that occurred 19 months ago.

[SilviaMaria]

08:44 PM on 04/20/2010

I would suggest to copy the 8 points of this letter and send them to your senators and the White House. One of the things we are forgetting is that we need to keep the pressure even if you have Republican senators (they will not care but you have the right to express your opinion).

[keepemhonest]

08:47 PM on 04/20/2010

Great idea!

[hillarysupporter]

11:43 PM on 04/20/2010

Not true. Republicans attempted to regulate in 2005, but Obama was one who voted Against it.

[ALA619]

03:33 AM on 04/21/2010

So Obama was the sole reason HR 1461 (Federal Housing Reform Act) wasn't passed in 2005? You fail to mention that republicans were the majority then and the bill never got passed committee. Not to mention the Bush administration OPPOSED the republican bill and would've vetoed it anyway.

[SilviaMaria]

09:07 PM on 04/21/2010

hillarysupporter

I found the following. I think it might clarify your point.

http://uspolitics.about.com/b/2008/09/18/republican-congress-talked-about-financial-reform-but-did-nothing.htm

Hope this helps, i was just googling to make sense out of this very argument and found this site as well as the OMB watch one, great article on here.

It seems this was not killed by democrats at all. tsk tsk tsk righties.

http://www.ombwatch.org/article/articleview/3116/1/396

Nonprofit Anti-Advocacy Language Proposed for Housing Bill

Supporters of H.R.1461, the Federal Housing Finance Reform Act of 2005, are optimistic it will go to the House floor soon, without nonprofit anti-advocacy language proposed by a group of conservative Republicans. The language would have disqualified any nonprofit that lobbies or carries on other advocacy activities from applying for grants under a proposed new affordable housing program.

[keepemhonest]

08:34 PM on 04/20/2010

@Sarad

1. March 2008 - Bear Stern Bailout:

* 3/14, 2008, Federal Reserve Bank (NOT Congress) gave Bear Stern $25 billion loan by free and clear assets from Bear Stearns.

* 3/15, 2008 - The Fed increased the amount from $25 Billion to $30 Billion

* 3/16, 2008 - Federal Reserve (not Congress) gave "Non-Recourse Loan" of $29 BILLION to JP Morgan Chase. This Non-Recourse Loan means that the loan is collateralized by mortgage debt and that the government can not seize J.P. Morgan Chase's assets if they DEFAULT loan.

* 3/2008 - W & Fed Chairman, Ben Bernanke, defended the bailout & said a Bear Stearns' bankruptcy would have affected the economy & could cause a "chaotic unwinding" of investments across the US markets.

2. AIG
* 2008 FIRST Bailout - Federal Reserve (NOT Congress) gave AIG $85 BILLION, to prevent the company's collapse by enabling AIG to meet its obligations to its credit default swap trading partners.

* 10/9/2008 SECOND Bailout - Fed Reserve gave AIG an additional $37.8 BILLION.

* 11/10, 2008,THIRD Bailout - TARP (Congress) would BUY AIG an $40 BILLION in newly issued AIG senior preferred stock, under the authority of the Emergency Economic Stabilization Act's Troubled Asset Relief Program.

3 December 2008 GM& Chrysler Bailout
* W administration (NOT Congress) gave GM & Chyrsler $17.4 billion - buying them a few weeks of financial relief but leaving the biggest decisions about the industry's future to President-elect Barack Obama.

Glad I can help educate you

[keepemhonest]

08:36 PM on 04/20/2010

@Sarad

I meant that last sentence with all due respect ... :)

[Elle Bach]

08:49 PM on 04/20/2010

Great stuff. (I love people who can speak in facts. Bravo!)

[davecarlson]

07:48 PM on 04/20/2010

Unless the DemoRats stop this spending spree there can be no Fin Reform:

According to a recent poll, 74 percent of likely voters are extremely or very concerned about the current level of government spending. And 58 percent think the level of spending is unsustainable.

Is the public right? Is Washington bankrupting America? Some facts from the video: Spending per household has risen over 40 percent in the last 10 years and is set to do so again in the next 10 pushing debt (and interest on the debt) to unprecedented levels. But that's just a result of PAST spending...

Our government owes $106 trillion in FUTURE spending commitments - that cannot be paid for.

We can solve it, but politicians will have to make tugh choices. Increasing taxes can't do the trick ($106 trillion is equivalent to taking all of the taxable income from every American nine times over), nor is it fair to saddle taxpayers with a problem created by government irresponsibility.

We need real spending reform. Merely returning to the spending per household levels of the 1990s would balance the budget in three years.
http://www.youtube.com/watch?v=x4ljZea6YSE&feature=player_embedded

[Elle Bach]

08:21 PM on 04/20/2010

"According to a recent poll, 74 percent of likely voters are extremely or very concerned about the current level of government spending. And 58 percent think the level of spending is unsustainable."

Where was all the concern when Bush was trashing the SURPLUS Clinton left him? Where were they when Bush drove us into deep deficits with 1) two massive tax breaks for the wealthy?, 2) two wars (to make his oil buddies and Cheney's construction contractors rich)? 3) expanding Medicare (to make big pharma rich)?, and 4, creating Homeland Security (to make the military industrial complex rich)? NONE - NONE of that "spending" of money we didn't have was a problem while Bush was drilling us into a $1.4 trillion dollar deficit, but after Bush & Co ran the country into a ditch and destroyed the economy, suddenly President Obama spending money to keep food on the table for American families who were and STILL ARE devastated by such gross irresponsibility is so HORRIBLE people are losing their minds and seeing "evil" where nothing but good exists.

I'm sorry. Take your complaints to a country that cares about your petty, shallow griping. Sit down, shut up, suck it up and get over it.

[Elle Bach]

08:43 PM on 04/20/2010

"Merely returning to the spending per household levels of the 1990s would balance the budget in three years."

btw...it will never be 1990 again. Your dream of "yesterday" is an unrealistic waste of time. We need a progressive income tax - an enforced one - where for-profit companies who make billions of dollars a quarter are not SUBSIDIZED by the people and actually hire Americand and pay taxes, and that goes for all the rest of the plutocrats we stupidily subsidize.

if you want to do something good for this country, stop your brethren who are voting Republicans into office from continuing to give away the power of this country to corporations (who are the REAL problem, the source of all our supposed inability to support all our country'a spendingt needs.

Your "government" is the only "friend" the people have. Get off Uncle Sam's back. i swear you people are like slaves standing on a sale block in shackles, holding up protest signs that say "keep your d*()ed hands off my chains.

Please do the country a favor and get s frigging clue.

[hillarysupporter]

11:46 PM on 04/20/2010

Those "corporations" hire people, pay salaries, pay health insurance, contribute to 401K's.... we need More corporations, you idiots.
When government hires more people, it only increase our taxes.

[Dorttrod]

07:01 PM on 04/20/2010

Want to be well informed, without spin, on Wall Street reform:

WATCH DYLAN RATIGAN on msnbc.

I'm surprised he is still on the air...

[Bayard Waterbury]

06:38 PM on 04/20/2010

Impressive list of necessities and names endorsing their inclusion. There are, having read this letter, other things which should be done. For example, limiting the size of banks to no more than 200 billion dollars in assets, forbidding banks from derivatives structuring, selling, trading, or holding, requiring that the executives receive bonuses at least two years after earning, in stock only, and that those bonuses be tied to long term performance, not short term earnings, and be subjected to any liability for losses experience by the firms. I, of course, would prefer that banking be fully separated from investing: No bank should be allowed to borrow at the FED discount window to finance its operating profits. How absurd is it for these TBTF's to borrow at essentially no interest from the FED and profit by purchasing US Treasury bonds -- that is financial masturbation.

[Rosewren]

07:28 PM on 04/20/2010

I don't see why anyone who wants transparency and accountability for these banks would object to what is outlined in the letter and the things you put forth in your post are needed as well especially the complete separation of the banks from investing. I'm sure the Republicans know what needs to be added and were foolish not to negotiate in good faith while the bill was in committee. They detract from their complaints because they have no intention of voting for anything. Fanned

[hillarysupporter]

11:49 PM on 04/20/2010

Ask Obama why he voted Against financial reform in 2005 when he was a Senator.
Republicans attempted to reform, but Democrats, specifically Obama, voted Against it.

[irishred]

06:33 PM on 04/20/2010

http://www.authorstream.com/Presentation/prstini-91400-understanding-mortgage-crisis-financial-backed-securities-mbs-presentation-business-finance-ppt-powerpoint/
This is a hilarious take on how wall st. and the bankers ripped off billions of dollars from investors.