WASHINGTON, D.C. – U.S. Sen. Sherrod Brown (D-OH) today attended a U.S. Senate Banking Hearing entitled “The Administration's Proposal to Modernize the Financial Regulatory System." In response, Brown issued the following statement:
Let me say at the outset that I agree with the president that we must reform our nation’s financial regulatory system. Why? All you have to do is pick up a paper or turn on the television to learn about homes being lost, Americans losing their jobs because businesses can’t get access to credit, and banks being shuttered.
I believe that one of our nation’s forefathers, James Madison, said it best when he wrote that “If men were angels, no government would be necessary.”
Much has been said and written about how we got here, how we arrived at the point of needing a comprehensive overhaul of the financial system.
One way we got here is through the free-wheeling creation and sale of complex financial instruments, which only a small percentage of the world understands. These instruments were largely based on bets that the mortgage market would reap huge gains indefinitely and were funded by loans to homeowners and investors, who often did not fully understand their loan terms and in many cases could not afford them.
The other route we took involved the failure of those charged with ensuring the health of our banking and financial services sector. I am referring to the patchwork quilt of regulators on whom we have relied to ensure that our bank accounts are safe and that we can invest with the confidence that all risks have been fully disclosed.
My priorities for reform are the protection of consumers, investors, and jobs and ensuring the stability of the nation’s financial infrastructure.
We must put in place a regulatory structure that will not only protect consumers and investors but protect valuable financial sector jobs. In the news we heard about the collapse of AIG, Lehman, Fannie, Freddie and Bear Stearns and the numerous banks that have either closed down or been purchased by other banks.
This really hits home in Ohio. National City, an institution that has been a pillar of the community for more than a century and a half, vanished over the course of a few months. We cannot forget about those Americans as we work to put a plan in place.
It boils down to this: People in my state want their hard-earned savings protected. They want to be able to get an affordable loan to purchase a home—on terms that they can understand. They want to know that when they invest, the institutions handling their investments aren’t so over-extended that a light breeze causes their house of cards to tumble. And small businesses want access to credit without impossible-to-meet requirements.
The administration’s plan seeks to:
• promote strong supervision and regulation of financial firms;
• establish comprehensive supervision and regulation of financial markets;
• protect consumers and investors from financial abuse;
• provide the government with tools it needs to manage financial crises; and
• raise international regulatory standards and improves international cooperation among financial institutions and markets.
As we consider the Administration’s plan and what I am sure will be numerous competing proposals for regulatory reform, I have several questions.
How will the Administration’s plan actually protect the average consumer of credit products and the average investor?
How can we have confidence that the Fed will be able to effectively execute its new responsibilities?
How will the components of the new scheme be integrated?
How will this plan prevent us from coming back to this same spot years from now?
We need vision and courage going forward. We also need to do more than pay lip service to the American consumer that we are “getting tough” on the institutions that caused this mess. We need to ensure that any new powers we give to existing institutions and any new agencies we create are designed to produce real results and not more of the same.
We need regulatory reform because, left to their own devices, too many financial institutions will act to preserve themselves at the risk of the system as a whole. Sensible bankers and insurers will have to pay the price for their selfish colleagues who think only in the short term. And so will the rest of us.
We cannot afford the status quo. We must act now to put a plan in place that protects consumers and investors, saves jobs, and ensures the integrity of our financial system.