Today, September 15, is the 10-year anniversary of Lehman Brothers’ bankruptcy. This event is widely considered to be the unofficial start of the financial crisis of 2008. Now, 10 years later, Wall Street banks have once again taken control of Washington, and it’s only a matter of time before we have another financial crisis.
The days, weeks, and months that followed the start of the 2008 crisis were terrifying and, while we avoided a complete collapse of the financial system, the Great Recession which followed was catastrophic. We are still dealing with its effects. The rich are doing well in today’s economy, but too many of the rest of us are left behind. Remarkably, a Pew Research Center survey last year found that just 37% of Americans believe that today’s children will grow up to be better off financially than their parents. That’s unacceptable.
The Dodd-Frank Act was one of the most important reforms passed in the wake of the financial crisis. The Act had a number of provisions, including requiring banks to keep more capital on hand—making it harder for them to take risks with our money— and the creation of the Financial Stability Oversight Council, which is charged with identifying and mitigating systemic risks.
Dodd-Frank, like all legislation, is imperfect, but was a huge step in the right direction. We don’t know when another financial crisis will occur (billionaire hedge fund guru Ray Dalio recently estimated that one might be two years away), but we can be 100% positive that another one is coming. Protections like Dodd-Frank can help to make crises less frequent and less damaging, which is why Congressional Republicans’ focus on unwinding them is so troubling. We may be less prepared to respond now than we were in 2008.
Below, I’ve pasted a campaign statement originally published on March 8, 2018, titled “Setting the Stage for the Next Financial Crisis.” In May, House Republicans, including Tom Marino, voted to roll back key parts of Dodd-Frank’s consumer protections, and President Trump signed that bill into law.
Just ten years ago, reckless and criminal behavior on the part of Wall Street banks and their executives caused the greatest financial collapse since the Great Depression. Millions of Americans lost their jobs and their life savings. At the height of the crisis, three million Americans also lost their homes to foreclosure each year. At the same time, literally half of middle-class wealth in the U.S. was wiped away. All told, the federal government estimates that $22 trillion was lost.
The impact was widespread, and affected both younger Americans entering the workforce, who wondered if they would ever be able to attain their parents’ quality of living, and older Americans, who wondered if they would ever be able to retire.
We all learned a painful lesson about what happens when greedy bankers are given too much control over the economy. I saw this firsthand in my legal career: our clients sued companies like Goldman Sachs, Countrywide, and GMAC Mortgage for their role in causing the crisis. I saw how a callous disregard for taking risks with other people’s money created a ticking time bomb. I can tell you from experience that these banks are bottomless pits of greed. They don’t care how many people lose their homes or their pensions if it means their executives and shareholders can buy another house, yacht, or private jet.
Amazingly, we are on the verge of repeating history and setting the stage for yet another financial crisis. This week, senators from both political parties finally found something that most of them could agree on: doing the bidding of the Wall Street banks who finance their campaigns. The bill they just sent to the House would gut the Dodd-Frank Act’s safeguards on lending and risk-taking practices of banks with between $50 billion and $250 billion in assets.
Let me be clear: this bill does not benefit ordinary Americans in any way, shape, or form. It is being pitched as a way to help community banks and credit unions, but that’s a lie. There are 5,300 community banks in the U.S., and almost all of them have fewer than $1 billion in assets. They’re not helped at all by this rule.
But 25 of the 38 biggest banks in the country fall into the $50 to $250 billion range, and now those banks will be free to do what they did before Dodd-Frank: make bets on the market with federally-insured deposits, engage in discriminatory lending practices, and take on outrageous levels of risk. These are exactly the same tactics that caused the last financial crisis, which is why the independent Congressional Budget Office said this bill would make it much more likely that we experience another financial crisis and another round of bank bailouts with taxpayer dollars.
These are big banks, not “mid-sized” banks, and they were at the heart of the last financial crisis. Countrywide and GMAC had fewer than $250 billion in assets at the time that they triggered the crash in the mortgage market. Megabanks like Barclays, Credit Suisse, Deutsche Bank, and Santander will also slip under the $250 billion threshold.
The banks and their puppets in Congress have claimed that the Dodd-Frank rules are stifling banks’ ability to make money. This is another lie: bank earnings have increased every year since the law’s passage in 2010, and hit record highs in 2014, 2015, and 2016. Community banks, which Wall Street lobbyists are using as a shield to ram through rule changes for big banks, are also doing well: 96 percent of them are profitable, and deposits have gone up every year since 2010.
Lobbyists have also argued that Dodd-Frank is hurting consumers, which is yet another lie. Since 2010, the number of banks offering free checking has gone up, mortgage and auto loan rates have gone down, and bank fees have leveled off after years of growth.
I’m running for Congress to represent you, not Wall Street banks. As this bill heads to the House, I urge you to call Tom Marino at 202-225-3731 and demand that he does the same.