Six Goals That Financial Reform Must Accomplish

The Leadership Conference is working with a broad coalition of organizations to ensure that financial reform legislation now under consideration in Congress includes strong protections for consumers and effective regulation to hold Wall Street accountable — and stave off future crises that can wreck the economy and upend the lives of millions of Americans, especially members of economically vulnerable communities.

The Leadership Conference and coalition members are calling for reforms that would:

Create a Consumer Financial Protection Bureau (CFPB) to oversee all lenders and provide real protections for consumers against abusive lending practices such as credit card fine print, incomprehensible trick mortgages, payday lending, and kickbacks for auto dealers.

Close the “casino economy” by regulating the derivatives market, where investors make large, risky, and secret investments with Americans’ retirement accounts, pensions, and college savings. The financial reform bill should require that financial institutions prove they have sufficient capital to cover the risks, and establish a stock exchange-style system for derivatives that would provide transparency around these now-secret financial instruments.

Dismantle “too big to fail” banks, and make it clear to commercial banks that they should be protecting American consumers’ assets, not betting on risky schemes for short-term gain. The financial reform bill should include resolution authority that would create a system for dismantling failing financial institutions. It should also require that banks and speculators — not taxpayers — pay the costs.

Strengthen corporate governance to hold companies and CEOs accountable for risky decisions that negatively affect the financial security of millions of Americans. The financial reform bill should empower shareholders to have a real voice in choosing candidates for company boards of directors, and it should require shareholder votes on executive pay at big banks.

Require disclosures by private equity and hedge funds to head off the next big financial meltdown. The financial reform bill should require hedge fund managers — including those at private equity and venture capital firms — in charge of more than $100 million to register with the Securities and Exchange Commission (SEC) and to disclose information to regulators.

Seek accountability for credit rating agencies that aided and abetted the financial crisis by stamping AAA seals of approval on what were actually enormously risky products. The financial reform bill should grant the SEC the authority it needs to hold credit rating agencies accountable.