Question by Columbian staff writer Kathie Durbin:
What is your plan to protect American consumers from a recurrence of the abuses committed by Wall Street investment banks that led to the Great Recession? Do you favor reinstatement of the Glass-Steagall Act or something similar?
David Castillo, Republican
I reject the premise that Wall Street investment banks alone caused the “Great Recession”. Reinstatement of Glass-Steagall will do nothing to address the underlying problems that led to the financial meltdown in 2008. My plan will be to take a look at the major culprits that led to our financial downturn — Fannie Mae and Freddie Mac. Taxpayers remain on the hook for billions of dollars to keep Fannie and Freddie afloat. It was their lead role in the housing bubble that played a major part in the events of 2008.
I was disappointed that the recently passed financial reform bill did not address the role that Fannie Mae and Freddie Mac played in the economic downturn. Nor did it address the “too big to fail” issue, in fact the bill makes it worse. Instead of setting up a commission to identify systemic risk, a comprehensive reform of our Chapter 11 bankruptcy laws would have been more in order. Allowing complex financial firms to go through an orderly bankruptcy is much better approach than establishing a process to have those firms bailed out. Additionally, the Fed had the responsibility of identifying “systemic risk” to the system and failed. I have zero confidence that a newly created government commission/agency will do a better job.
In addition, many of the big financial firms (like AIG) where overleveraged. When the market had its precipitous drop, AIG’s overleveraged position made it impossible for them to survive. Comprehensive reform must address this issue and, unfortunately, the current legislation does not.
Cheryl Crist, Democrat
We must rein in the corporate abuses that caused the recession. That means reinstating an updated Glass-Steagall Act to prevent FDIC-insured banks from gambling with our savings, while still encouraging other firms to make the investments, such as venture capital, that spur innovation and economic growth; creating an independent Consumer Financial Protection Agency to catch cheaters; auditing the Federal Reserve to account for the taxpayer money they spent bailing out Wall Street; and capping the size of banks so that they are no longer “too big to fail.” I support the efforts of Congress and President Obama to implement these measures, though strengthening the regulations will only work if Congress provides tough oversight. I’ve been a stockbroker, I’ve seen the games traders will play, and in Congress I’ll watch closely to make sure Wall Street plays by the new rules.
Denny Heck, Democrat
The reckless practices of Wall Street materially contributed to the greatest economic recession since the Great Depression. Without comprehensively reigning in Wall Street banks and CEO’s, we will have the same system in place that caused the crisis and led to the loss of over seven million jobs and forced countless small businesses to close their doors forever. This must never happen again.
We need reform that will fix a broken system that allowed the big banks to game the system and take advantage of consumers, protect taxpayers from any future bailouts, hold Wall Street banks and reckless CEO’s accountable, and restore confidence in the markets to make it easier for small businesses to get the credit they need to grow and create jobs.
- I was the first candidate in this race to call for the reinstatement of the Glass-Steagall Act, which will get banks back to the business of being banks, lending safely and responsibly to small businesses in our communities.
- Wall Street’s risky derivative contracts must be forced out of the shadows and into public exchanges.
- Consumer protections must be enhanced to prevent Wall Street from engaging in deceptive practices and marketing.
Very importantly, we must ensure that every cent of taxpayer money used to bailout Wall Street banks is paid back with interest.
Wall Street reform is imperative for our economic growth going forward.
David W. Hedrick, Republican
I find this question to have an inherent bias. Wall Street did not cause our recent economic problems. These problems were caused by our Federal government whose regulations and subsequent actions created an environment where risky investments were encouraged and often rewarded.
Politicians within our government are well known for this kind of circular strategy that increases the size and scope of government at the expense of individuals and small businesses. First, they create a problem through excessive government regulation and then, attempt to solve the problem with yet more government regulation causing an even larger problem.
To end excessive risk-taking in the markets, companies must be allowed to succeed or fail based on their own merit. The recent string of government bailouts where government chooses winners and losers at the expense of the American taxpayer must stop. This only serves to encourage the next round of poor decisions by business leaders who make the judgment that there is no risk for poor decisions.
I agree with Ronald Reagan. Government is not the solution to the problem. Government is the problem.
Jaime Herrera, Republican
My number one priority for financial reform is solving the problem of “too big to fail.” We can’t have a system where companies are free to take huge risks, and if they pay off they reap huge rewards, but if they fail the taxpayers are on the hook for massive bailouts. That’s privatized gains and socialized losses, and it’s what so many of us are so angry about.
I would be open to a number of approaches to achieve this goal, including potentially reinstating some portions of Glass-Steagall.
Norma Jean Stevens, Independent
Yes, the consumer does need to be protected. However, we must be very careful with enacting regulations that could, in turn, hurt the consumer. An example would be the fees imposed on banks that would then be passed on to the consumer, causing them to pay more money to have their bank account with the bank, and that would not be good. We need to listen to the experts and others with the insight and knowledge to make sure that any new regulations are the right way to go, if it will work and if it is constitutional. After I have done my homework and have listened to the experts and to the people, I would work to do the right thing in enacting new regulations that may or may not be similar to the Glass-Steagall Act.
