Returning to Regulatory Reform

Returning to Regulatory Reform

This quarter, Citigroup- who still owes bailout funds to the American taxpayers- reported netting 4.4 billion dollars while 9.6 percent of Americans are still listed as unemployed and the tentatively recovering economy is creating jobs at a less than ideal rate. Somehow, the banks, whose reckless lending and side-stepping of government regulators were major causes of the 2008 financial breakdown, have come out of the crisis relatively unscathed while average Americans still suffer. As President Obama moves on from health care and returns to the economy and energy issues, among others, the importance of fixing the broken regulatory system has taken precedent.
The lack of regulation and the resulting actions of the banks were major catalysts for the damaging financial crisis during the last presidential election. Although Obama's economy-saving efforts began with government spending, job creation, and tax breaks, he has now turned to fixing the root problem: the banks. The first step will have to be ending the sweeping deregulation of the nineties, but there is more to be done. In Chis Dodd's Senate plan to re-regulate the banks, the derivatives market will be brought under control, a Consumer Financial Protection Agency, initial steps to downsize overly large banks, and other heightened regulations. This is hardly a final or a comprehensive plan, but it acts as an effective first step to reform. 
Following the recent bitterly partisan health care debate, the bipartisan distaste for the banks in Congress is not enough to override the deep idealogical divides over regulation. Originally, Mitch McConnell had gotten all 41 Republicans in Senate to agree to voting against any reform plan, but as the public case against Goldman Sachs began to emerge, some Republicans backtracked slightly. Certainly the contentious nature of government involvement in the banking sector will continue this debate, though some hopeful comments have been made by newly-elected Senator Scott Brown, indicating support for some of the reforms and a willingness to work with the Democratic caucus. 
The American government cannot fix everything on their own. Already, European nations have been extraordinarily proactive in challenging banks. British Prime Minister Gordon Brown has began to order an investigation of the actions of Goldman Sachs because of major losses of a massive bank based in England, and Germany has threatened to take similar action. Hopefully, these legal movements along with increased regulation- and more attentive regulators, for the ones over the past few years were truly asleep at the wheel- in the United States will help to ensure that a global financial breakdown like the one in 2008 is prevented, or at least postponed.