We all remember the darkest days of the financial crisis five years ago.
Credit dried up. The stock market cratered. Millions of people lost their jobs. Billions of dollars in retirement savings disappeared.
There were legitimate fears that the dominos of our financial system would never stop falling, and we were heading into another Great Depression.
On many of these fronts, we’ve made real progress. The Dodd-Frank Act was the strongest financial reform law in three generations. If I had been in the Senate three years ago, I would have voted for it proudly.
Dodd-Frank put in place the new Consumer Financial Protection Bureau, which has made serious strides toward leveling the playing field for families and increasing transparency in the marketplace. Thanks to the CFPB, I don’t think there will ever again be so many lousy mortgages to threaten our families and our economy.
But no law is perfect — and our work isn’t done.
Most importantly, where are we now on the “Too Big to Fail” problem?” Where are we on making sure the giant financial institutions on Wall Street can’t bring down the whole economy with a wild gamble?
After the 2008 crisis, we widely recognized that Too Big to Fail had distorted the marketplace. The largest financial institutions have lower borrowing costs and competitive advantages because of their free, unwritten, government-guaranteed insurance policy.
There was a lot of talk, but look what happened: The four biggest banks are 30% larger today than they were five years ago. Too Big to Fail status is giving the 10 biggest US banks an annual taxpayer subsidy of $83 billion.
So what are we doing about it? More delays. Many say Congress should wait to act further because the agencies still have to issue many of the rules required by Dodd-Frank.
It’s true many rules are not yet written, but that’s because the agencies have missed more than 60% of Dodd-Frank’s deadlines.
When Congress sets deadlines and regulators miss most of them, it’s time for Congress to step in. Congress is responsible for oversight — and that’s what oversight means.
For that reason, I partnered with Senators John McCain, Maria Cantwell, and Angus King to offer up one potential way to address the Too Big to Fail problem: the 21st Century Glass-Steagall Act. It’s time to separate boring commercial banking from risky investment banking once again.
There are many other approaches for ending Too Big to Fail, and there is no single answer for preventing future crisis.
But we should not accept a financial system that allows the biggest banks to emerge from a crisis in record-setting shape while ordinary Americans continue to struggle.
We should not accept a regulatory system that is so besieged by lobbyists for the big banks that it takes years to deliver rules that are too often watered-down and ineffective.
We should never forget the consequences of letting financial behemoths hold our economy hostage. We managed to avoid that grim fate, but our economy still suffered a staggering body-blow.
There were many powerful interests that that have fought against financial reform, and they will fight future reform efforts too.
But David beat Goliath with the passage of Dodd-Frank. David beat Goliath when we fought for and established a strong consumer agency.
I am confident David can also beat Goliath on Too Big to Fail. Five years after the financial crisis, we just have to pick up the slingshot again.