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Pioneer Editorial: Wall Street reform on the agenda

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opinion Bemidji, 56619
Bemidji Pioneer
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Bemidji Minnesota P.O. Box 455 56619

President Barack Obama has carved out an ambitious domestic agenda, one which critics say is too ambitious and won't get done. But the president tackled health care reform and succeeded; now his sights is set on Wall Street reform.

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A number of factors combined in late 2008 which caused the eventual Great Recession, and steps must be taken to avoid history from repeated itself. That includes passage of major financial reform to rein in Wall Street operations that put consumers in jeopardy and, ultimately, our financial system.

Billions of taxpayers dollars were sent to the nation's biggest banks to bail them out under the "too big to fail" principle, and now we find that the banks are hurrying to pay back those funds in light of revealing obscene raises given bank executives. And, much to the chagrin of the federal government, lending and credit lines haven't been expanded to the point of helping kick-start the economy. A USA Today/American University review finds that average pay raises at banks receiving federal aid rose 9.4 percent versus 1.8 percent for non-aided banks.

The downfall of the great financial houses, causing the recession, came in part from the trading of derivatives, a practice of assuming risk by betting on the future worth of a commodity, such as corn futures. Trading of derivatives by speculation, and unregulated, caused the bottom to fall out of the economy.

The matter is now before the U.S. Senate, with debate set for Monday to start on Wall Street reforms, despite blocking by Republicans. U.S. Sen. Amy Klobuchar, DFL-Minn., lays out the Democrat argument in an opinion column on this page, and the solutions she offers are reasonable restrictions to keep our financial system whole.

Reining in derivatives by trading them in the open, and accountable, through a service will help avoid straying too far with speculative risk.

The Senate is leaning toward such trades through a Federal Reserve-led oversight council. Last year, U.S. House Agriculture Chairman Collin Peterson, DFL-7th District, authored legislation to move derivatives through a U.S. Department of Agriculture council, as most derivatives traditionally have involved ag commodities.

The president, however, understands that preserving the free market is equally important.

"I believe in the power of the free market," he said in remarks Thursday in New York. "I believe in a strong financial sector that helps people to raise capital and get loans and invest their savings. That's part of what has made America what it is. But a free market was never meant to be a free license to take whatever you can get, however you can get it. That's what happened too often in the years leading up to this crisis."

We need Congress to come together on a meaningful Wall Street reform package, allowing Congress to move onto the next hot-button issue.

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