THE BLOG
04/18/2010 05:12 am ET Updated May 25, 2011

Financial Reform From Soup to Nuts

In September 1930, 11 months after Black Tuesday, the Three Stooges released their first feature film, "Soup to Nuts." America badly needed some lighthearted clowning to get through the dark days of the Great Depression, and the Stooges provided it. Today, as we work to climb out of the Great Recession, we're being treated to a similar but far less amusing routine. Congress tweaks Wall Street's ear. Wall Street bops the Administration on the head. American workers and families are left holding the bag.

We desperately need to move beyond the slapstick politics that has taken the place of serious financial reform efforts. To that end, as a Democrat who has worked on Wall Street, and who was born and grew up on Main Street, let me set a few things straight.

First of all, Wall Street needs to stop obstructing reform in Washington. Eighteen months after the collapse of Lehman Brothers, we still haven't passed a financial regulation bill in Congress, and the problematic regulatory structure that led to our current predicament remains intact. Just as we can't create jobs without a strong private sector, we can't prevent a future financial crisis without smart regulation from Congress. The House has passed a bill that includes a number of needed fixes, including greater oversight of the derivatives markets, consumer protection, and a systematic risk regulator. Instead of lobbying against them, Wall Street should help shape these sensible measures and send them to President Obama's desk.

Second, Congress needs to stop demonizing Wall Street. It might be good politics in the heartland, but it's not good for the nation's economic recovery. Yes, Wall Street got a number of things terribly wrong that contributed to the downturn. But so did Congress -- Republicans and Democrats. The fact remains that we need the full participation and partnership of the financial sector to create jobs, especially in New York City. There's a reason why New York is the second largest city economy in the world. Wall Street is an unparalleled economic engine that we need to channel through smart reform, accountability, and transparency, not dismantle through specious legislation that doesn't get at the root of what caused the economic crisis: bad lending practices.

Which raises a third point. Let's clarify what this debate should be about. Of the millions of jobs lost nationwide since 2007, tens of thousands of those cuts occurred in New York's financial industry. And so many of those laid-off were middle class clerical workers, assistants, and support staff who don't take home six figure bonuses or summer in the Hamptons. The financial sector is just like any other major component of our economy -- it provides jobs that support middle class families, and its tax roles contribute to essential public services. With this in mind, let's change the nature of the debate. It's not about a government takeover of the private sector, as Wall Street has loudly alleged. And it's not about corporate transgressions and greed, as Congress has implied by threatening to tax executive compensation. It's about eliminating the bad lending practices, encouraged by loose regulation, which together have conspired against the entire economy. It's about a new regulatory framework that empowers Wall Street to generate growth and jobs in New York City and across America.

(And to be clear, I'm not making the case to engage the financial sector because it used to pay my rent. If the circus were the biggest employer in New York, I'd fight for every acrobat and ringmaster in the tri-state area. I'm not pro-Wall Street or anti-Wall Street. I'm pro-jobs and pro-New York City.)

Finally, going forward, it's so important that we achieve more than reasonable financial industry regulation. We also need financial industry participation to create new jobs in emerging industries. Instead of incentivizing risky derivatives and complicated financial instruments, Congress should encourage patient capital. We need to work with Wall Street to move high finance away from unsustainable short-term thinking, and toward long-term investments in clean-tech, biotech, nanotech, health-tech, and new media. That's how we'll create sustainable economic growth and jobs for Wall Street and Main Street.

Unless we can have a real "soup to nuts" conversation about reform -- from smart regulation to smart investments in the new economy -- none of us will be laughing last.