McCaskill Calls for Greater Accountability on Wall Street
Financial industries need reasonable regulation to prevent future bailouts
WASHINGTON, D.C. – Following another massive bailout on Wall Street, U.S. Senator Claire McCaskill in a speech from the Senate floor called for greater accountability and transparency in the banking and insurance industries through reasonable regulation. McCaskill pointed to the trend in recent years towards deregulation and lax enforcement of existing laws as culprits in the current state of the American economy. She asserts that reversing this deregulation trend is the best way to make sure the country does not see a repeat of recent government bailouts.
“Now what we’ve got to do is have reasonable regulation,” McCaskill said. “We have to enforce our laws – both our competitive laws and our regulatory laws. And we have to make sure now that we watch the taxpayer money and make sure not a dime of it goes to a payout to anybody who doesn’t deserve it.”
Audio of McCaskill’s speech is available (see instructions), and the text of the speech is below.
Thursday, September 18, 2008
Mr. President, I would like to talk about what’s going on in our economy right now. I think it’s important that we point out a couple of things at the outset.
First, I had the opportunity yesterday afternoon to spend some time with some great community bankers from my state. They said to me something that really resonated, and that is I don’t think we’ve done enough to tell America the difference between deposit banks and investment banks. There are a whole lot of folks that I represent right now who are nervous. My sister caught her mother-in-law with cash in her pillow case this week. The reason that they’re nervous is, frankly, a lot of the problems that have been caused here were not because of deposit banks.
Deposit banks are highly regulated. Deposit banks have state government and federal government looking over their shoulder every single day. Deposit banks are fine in the United States of America. Part of that is because of appropriate regulation and oversight by state and federal governments. And they’re insured. Every account in America that is in a deposit bank is insured by the federal government for up to $100,000. So in fairness to all of those great community banks and banks in my state that have used sound business practice, that haven’t let greed be the watch and ward, that have served their communities well, let me reassure all of the people who bank at those great institutions that they can take a sigh of relief today because the problem that we have in our economy is not with deposit banks.
Now, let’s step back and see what’s happened. There are three things that have happened here: one was massive deregulation of exotic financial instruments in investment banks and insurance companies. Two, there was a huge amount of greed. And, three, no one was watching out for the taxpayers.
You know, I heard my colleague from Georgia talk about short selling and naked short selling, saying we need to tell them to enforce the law. Think about that for a moment. We need to tell someone to enforce the law as it relates to trading. I heard just an hour ago that today the F.E.C. is going to enforce naked short-selling. Now naked short selling would take longer to explain than I have this morning, but suffice it to say it is wrong and bad. When you are hedging, long selling and short selling, you need to take delivery. That’s how this works and there are rules against naked short selling.
But it wasn’t enforced. They’re enforcing it today. But why wasn’t it enforced last week? Why weren’t the rules enforced the week before? Why weren’t the rules enforced last year? They didn’t want to. Pretty simple. Nobody wanted to enforce the rules. Why not? Because the titans of Wall Street were in charge. The titans of Wall Street have had their way with this White House. And facts are stubborn things. If the laws are on the books and this administration is not enforcing it, they need to explain to the American public why they are now on the hook. The taxpayers are now on the hook for hundreds of billions of dollars because these guys didn’t think it was important to enforce the rules against their friends.
Credit default swaps is another exotic financial instrument that became en vogue after the massive deregulation of this administration. It was made possible by the deregulators. Now here’s the thing that is killing me. It’s just killing me. All these folks have been screaming deregulation — get the government off our back; evil government off our back; big, bad government off our back; deregulate, deregulate, deregulate.
Remember the transformer toy that went from an animal to a massive machine? Well, we have transformers around here. These massive deregulation advocates all of a sudden are saying, ‘We’ve got to enforce rules on Wall Street. We’ve got to regulate.’
Come on. Do you think we’re dumb? You can’t transform overnight from a big, bad deregulator to ‘I’m now the cop on the beat. I’ll take care of Wall Street.’
It’s not honest. Be principled – either you’re a deregulator and you want to live with these consequences and you want to say to the American people, ‘hey, when we deregulate, this is the risk, this is the risk that we are taking with your money’ or you’re not.
They are going after the status quo. Many of my friends on the other side of the aisle, they’re fighting the status quo. And guess what? They created it. This was their plan. It didn’t work out. It didn’t grow our economy. It didn’t create jobs. American families for the first time in our history have gone down in terms of their average income. For the first time in our history, America is not growing. Our prosperity is not growing.
Senator Phil Gramm marshaled through a bill that allowed investment banks and insurance companies to run wild. I’ve got Missouri families that have lost jobs. I’ve got a lot of autoworkers who are losing their jobs in Missouri. And one of the things that’s hard is that we have one of Senator McCain’s economic advisors, Senator Gramm, who did this massive deregulation. We have another one who was a CEO of a corporation who walked away from a company with $42 million in her pocket. Because she got that company to the stratosphere? No – she was fired. The board of directors fired her and gave her a $42 million pay day.
Now, I’ve got to tell you, in Missouri that doesn’t compute. It just doesn’t compute. When you lose your job because you haven’t done a good job, you shouldn’t get paid for it. And I know I’m offended at the notion that any of this taxpayer money is going to go to multimillion-dollar payouts to anybody who ran any of these companies. And it’s one of the things that we have to pay very close attention to because now taxpayer money is on the line. We have to make sure it is spent appropriately. CEO salaries are out of control in this country. This is not a matter of being competitive. It is not that we have to pay our CEOs so much more because everybody else is. Right now in America, a CEO is making 40 times the average worker’s salary. Do you know what it is in Japan, one of our competitors? Ten times. It’s only 10 times.
Now, I want to mention Social Security, as my colleague from Georgia mentioned social security. And I want everyone to dwell just a minute on this notion. At the same time Senator McCain, Senator Gramm and many others were saying deregulate, deregulate – what else were they saying? ‘The future of Social Security depends on privatization. Privatization of social security was our ticket to the Promised Land for stability in the social security program.’ Think about that today. Think about what that means today, yesterday, Monday. Think about the consequences.
We need to realize that we have to learn from our mistakes. We’ve got to fix what’s broken and for gosh sake, we cannot talk about privatizing Social Security on Wall Street right now. I’m hopeful this is a wake-up call to those who advocate the privatization of Social Security.
They say, ‘Deregulate, get government off our backs, free market, lax enforcement, big government, bad government, deregulate, get government off our back, free market, bad government, big government,’ until their friends get in trouble. Do we have a free market with oil? No, we don’t have a free market for oil. We subsidize oil companies. Do we have a free market for the pharmaceutical companies? No, Medicare Part D was a huge profit subsidy for those companies. Do we have a free market for Wall Street? No, we’re rushing in to save. So when their friends get in trouble, who comes to the rescue? Who comes to the rescue when trouble arrives at the doorstep? The taxpayers of the United States of America.
Now what we’ve got to do is have reasonable regulation. We have to enforce our laws – both our competitive laws and our regulatory laws. And we have to make sure now that we watch the taxpayer money and make sure not a dime of it goes to a payout to anybody who doesn’t deserve it. Thank you, Mr. President.