Financial Regulation That Protects Taxpayers Not Wall Street

By Surya "Chili" Yalamanchili

For dramatic regulatory reform that brings back Glass-Steagall, limits leverage, and turns "too big to fail" into "too big to exist." We must put Main Street ahead of Wall Street to protect American taxpayers.

• Too big to fail = Too big to exist. The majority of the financial system is made up of massive institutions that are so interconnected that if one failed, it would trigger a wave of defaults that could bring down all firms. Given the complexity of the "financial innovation" in instruments that these firms use, effective regulation to wind down firms is not practical. We must limit their size so a single failure would be a flesh wound and not terminal.

• Bring back Glass-Steagall Act. We must separate out the casino-like behavior of investment banking and trading from that of everyday banking. The latter is the lifeblood of our economy and deservers federal guarantees. However, the former should not be allowed to capitalize on essentially interest-free taxpayer money to make massive bets that are used to pay outlandish bonuses in a time of national crisis.

• Limit leverage, regulate derivatives in transparent marketplace, and hold ratings agencies accountable. Banking interests were able to essentially write their own regulations since the late 90's. Naturally, they repealed and resisted the policies that safeguarded taxpayers at their expense.