News / USA

Battle Emerges Over US Financial Reform

Michael Bowman

The top Republican in the U.S. Senate has announced strong opposition to a Democratic proposal to reform America's battered financial system. A partisan battle has erupted over how best to prevent financial meltdowns and the economic havoc they inflict.

The struggling U.S. economy still bears scars from 2008, when a cascading failure of banks, investment houses, mortgage giants and insurance firms obliterated much of America's financial landscape, froze credit for consumers and businesses, and accelerated a plunge into the deepest recession since World War II. In a desperate bid to prevent complete economic collapse, the federal government spent hundreds of billions of dollars to bail out scores of near bankrupt private financial institutions.

Republicans and Democrats agree that the dire turn of events must never be repeated. But how best to fix the financial system is shaping up as the latest partisan fight to consume Washington.

Tuesday, Senate Minority Leader Mitch McConnell dashed waning hopes of bipartisan support for a Democratic financial reform bill. Addressing the Senate, the Kentucky Republican said the proposed package gives too much authority to the federal government and fails to protect taxpayers from the costs of any future bailouts.

"We cannot allow endless taxpayer-funded bailouts for big Wall Street banks," said  Mitch McConnell. "That is why we must not pass the financial reform that is about to hit the [Senate] floor [for debate]. The fact is: this bill would not solve the problems that led to the financial crisis. It would make them worse."

Under the Democratic bill, the U.S. central bank, known as the Federal Reserve, would be empowered to craft and enforce consumer protection rules for large financial institutions. Banks would also be restricted in the types of investments they can make. It was private institutions' dealings with complex financial products tied to special home mortgages for high-risk borrowers that helped spark the meltdown of 2008.

The Obama administration says the United States cannot afford to drag its feet on financial reform. U.S. Treasury Secretary Timothy Geithner had this response to Senator McConnell:

"Look at the devastation caused by this financial crisis," said Timothy Geithner. "Look at the damage it did to tens of millions of Americans. I do not think there is a tenable position anyone could take that says we do not need to fix this system."

Geithner says the current system allowed banks and other institutions to take huge risks without bearing the cost of failure.

"And you had the spectacle of the United States of America come into the worst financial crisis since the Great Depression [of the 1930s] and had, basically, no tools to unwind, to put into bankruptcy large institutions," he said. "The taxpayer faced an untenable choice: either to let the system collapse or put hundreds of billions of dollars of taxpayer money at risk. And I think that fundamental recognition is going to drive us to a necessary, essential, very well-designed, sweeping set of reforms."

But while applauding safeguards against future financial meltdowns, some progressive voices say America's financial sector must pay for damages already inflicted. The head of America's largest union umbrella group, AFL-CIO President Richard Trumka, says banks that survived thanks to the federal bailout are now flooding Washington with lobbyists to defeat financial reform, without taking responsibility for the havoc and economic losses they caused.

"Wall Street just hasn't gotten the message," said Richard Trumka. "They [banks] all helped to create the crisis. They all helped destroy 11 million [American] jobs. And quite frankly, they should start paying to create jobs that they destroyed.

In fact, many recipients of federal bailout money are repaying the loans with interest, minimizing government losses and, in some cases, giving the U.S. Treasury a modest profit on the initial layout of funds. Nevertheless, no one is arguing that overall effect of the financial crisis has been anything but devastating to the U.S. economy and its workforce.

You May Like

Video Five Patients Given Experimental Ebola Drug Said To Be Improving

Experimental drugs have been tried on six people: three Westerners and now, three African pyhysicians More

Video In Ukraine, Fear and Distrust Remain Where Fighting has Stopped

As Ukrainian military reclaims control of eastern cities residents rebuild their lives, but many say everyone is being treated with suspicion More

Video In Rural Kenya, Pressure Builds Against Female Circumcision

Girls learn to object; FGM practitioners face penalties from jail sentences to stiff fines More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Five Patients Given Experimental Ebola Drug Said to Be Improvingi
X
Carol Pearson
August 19, 2014 11:43 PM
The World Health Organization has approved the use of experimental treatments for Ebola patients in West Africa. The Ebola outbreak there is unprecedented, the disease deadly. The number of people who have died from Ebola has surpassed 1,200. VOA's Carol Pearson reports on the ethical considerations of allowing experimental drugs to be used.
Video

Video Five Patients Given Experimental Ebola Drug Said to Be Improving

The World Health Organization has approved the use of experimental treatments for Ebola patients in West Africa. The Ebola outbreak there is unprecedented, the disease deadly. The number of people who have died from Ebola has surpassed 1,200. VOA's Carol Pearson reports on the ethical considerations of allowing experimental drugs to be used.
Video

Video In Ukraine, Fear and Distrust Remain Where Fighting has Stopped

As the Ukrainian military reclaims control of eastern cities from pro-Russian separatists, residents are getting a chance to rebuild their lives. VOA's Gabe Joselow reports from the town of Kramatorsk in Donetsk province, where a sense of fear is still in the air, and distrust of the government in Kyiv still runs deep.
Video

Video China Targets Overseas Assets of Corrupt Officials

As China presses forward with its anti-graft effort, authorities are targeting corrupt officials who have sent family members and assets overseas. The efforts have stirred up a debate at home on exactly how many officials take that route and how likely it is they will be caught. Rebecca Valli has this report.
Video

Video Leading The Fight Against Islamic State, Kurds Question Iraqi Future

Western countries including the United States have begun arming the Kurdish Peshmerga forces in northern Iraq to aid their battle against extremist Sunni militants from the Islamic State. But there are concerns that a heavily-armed Kurdistan Regional Government, or KRG, might seek to declare independence and cause the break-up of the Iraqi state. As Henry Ridgwell reports from London, the KRG says it will only seek greater autonomy from Baghdad.
Video

Video In Rural Kenya, Pressure Builds Against Female Circumcision

In some Kenyan communities, female genital mutilation remains a rite of passage. But activists are pushing back, with education for girls and with threats of punishment those who perform the circumcision. Mohammed Yusuf looks at the practice in the rural eastern community of Tharaka-Nithi.
Video

Video For Obama, Racial Violence is Personal Issue

The racial violence in the St. Louis suburb of Ferguson is presenting U.S. President Barack Obama with an issue to which he has a deep personal connection. To many Americans, Obama's election as America's first black president marked a turning point in race relations in the United States, and Obama has made ending the violence a policy priority. On Monday he issued a new call for calm and understanding. Luis Ramirez reports from the White House.
Video

Video Clinton-Obama Relationship Could Impact 2016 Election

President Barack Obama and former Secretary of State Hillary Clinton have a long and complicated relationship. That relationship took another turn recently when Clinton criticized the president’s foreign policy. VOA National Correspondent Jim Malone reports there is renewed attention on the Clinton-Obama relationship as Hillary Clinton considers running for
Video

Video Iran Looks to Maintain Influence in Baghdad With New Shia PM

Washington and Tehran share the goal of stopping Syrian-based militants in Iraq. But experts say it's Iran, not the United States, that will most influence how the new government in Baghdad approaches internal reforms and the war in Syria. VOA State Department Correspondent Scott Stearns has the story.

AppleAndroid