Take, for example, the Great Recession. While the question “Why did it happen? Who or what caused huge, respected institutions to fail practically overnight?” has a complex answer, we do know some things. As detailed in a growing number of works such as The Big Short and Inside Job, a big part of the problem was that banks got too big, too powerful, and too greedy. The biggest banks in the US are Bank of America, Citigroup, Wells Fargo, and JP Morgan Chase. Together they control $8.09 trillion worth of assets, an amount equal to 45% of the US’ GDP. The problem with big banks is that when a bank is that big, if it goes down it can and will take everyone else with it. Since the banks know that the government would never let that happen, as too many Americans would suffer, they know that they can take risks: if they’re right, they make more money than most individuals could imagine, and if they’re wrong then taxpayers will foot the bill. And so, in the lead up to the Great Recession, banks started taking huge risks such as issuing mortgages to people they knew couldn’t pay and then passing that debt on to investors, taking on too much debt themselves, and giving executives exorbitant bonuses at the end of every quarter.
After the crash, we (supposedly) realized that things had to change: we needed to create regulations because banks clearly couldn’t regulate themselves, and we had to institute rules so that banks could no longer shroud their risky practices in ever-more complex jargon. The result of this resolve was Dodd-Frank and the Consumer Financial Protection Bureau (CFPB). While not perfect, the passing of Dodd-Frank and the creation of the CFPB have definitively made consumers safer than they were before the Recession, and have reigned banks in to a certain degree.
Predictably, pro-Wall Street Congresspeople have now proposed a bill, the Financial CHOICE Act (FCA), that will make Wall Street executives richer and the common American more vulnerable.
Specifically, the bill is intended to make it almost impossible to punish banks. For example, in order to punish banks that engage in risky behavior, evidence would have to meet the standard of “clear and convincing evidence of wrongdoing,” a standard that very few cases could meet. In essence, the FCA would raise the evidentiary standard so high that very few could ever be held accountable for their actions. Similarly, the FCA would make it possible for banks to opt out of stress tests and the creation of living wills by changing very little in their actions. Because both stress tests and living wills force banks to be accountable and conscious of the risks they’re taking, the debt they’re accruing, and the true value of their assets, allowing banks to opt out of those will effectively allow them to throw caution and risk-assessment out the window once again. Finally, and perhaps tellingly, the FCA calls for the abolishment of the Office of Financial Research, a group that (at least in theory) is supposed to search out and keep track of early crisis-warning signs. While the group has not been as active as it maybe should be, its existence is important if only to avoid the “we didn’t see it coming, sorry that mostly low-income Americans have to suffer” moment every crisis seems to create.
The FCA isn’t all bad: it has some neutral propositions like tripling fines for those proven to have committed fraud and changing the name of the CFPA to the “Consumer Financial Opportunity Commission.” However, the bad easily outweighs the good, and if we want to avoid another recession as deep and harmful as the last, we must resist its passage into law.
We need to organize, voice our opinions to our representatives, write letters, protest, and really do anything we possibly can to avoid allowing the government to once again function as Wall Street’s puppet. Because if we don’t, only common Americans, especially low-income, marginalized ones, will suffer, and bankers will continue to profit off of our misfortune.