Release: Stronger Financial Reform Needed to Avert Another Economic Crisis

WASHINGTON, March 17 – Sen. Bernie Sanders (I-Vt.) today called Senate legislation unveiled this week to rewrite rules governing financial institutions a step forward, but said “much more needs to be done to regulate Wall Street to prevent another severe financial crisis from happening again.”

Sanders said he would propose amendments to the financial overhaul legislation to limit credit card interest rates and discourage Fed secrecy.  He also will work with colleagues to strengthen consumer protections, curb unbridled market speculation and break up “too big to fail” banks.

“We have got to make it crystal clear to Wall Street that the era of wild speculation and greed is over.  We need a Wall Street which invests in the job creating productive economy, and not one that continues the unregulated gambling activities which have been so devastating to the middle class of our country,” he said. “Unfortunately, the financial reform bill, as currently written, does not go far enough in making the kinds of changes we desperately need.”  

Sanders said any meaningful financial reform bill must stop big banks from ripping-off consumers by charging credit card interest rates as high as 35 percent.  He has proposed legislation to impose a 15 percent cap on what lenders may charge credit card customers.

The senator also called for greater transparency at the Federal Reserve. The legislation proposed by the Senate Banking Committee chairman would allow the Government Accountability Office to audit the Fed's emergency lending programs, but bar GAO from naming loan recipients and detailing the terms. “As long as the Federal Reserve is allowed to keep secrets about its loans, we will never know the true financial condition of the banking system. The lack of transparency could lead to an even bigger crisis in the future,” Sanders said.

The financial reform bill also falls short on breaking up financial institutions considered “too-big-to-fail.” For the most part, the proposed legislation would let regulators intervene only after a financial institution was on the verge of collapse.  “We cannot wait for the next crisis to solve this problem,” Sanders said. “We have got to take action now.”

He also would insist on an independent agency to protect financial consumers. “Putting such an agency at the Federal Reserve is like putting the fox in charge of the hen house,” he said.  “Congress already has given the Fed the chance to enforce consumer financial protection. It failed miserably.”

Finally, Sanders said the financial reform bill does not do nearly enough to reform credit default swaps and other arcane financial products that led to the collapse of Lehman Brothers and Bear Stearns, resulted in a $182 billion bailout of American International Group, and precipitated the worst financial crisis since the Great Depression. “Many of these financial weapons of mass destruction don't just need to be regulated, they should be banned,” he said. 

Sanders said that he will fight to strengthen the financial reform bill when it reaches the Senate floor for debate.