When you hear the word regulation…what do you think of? Republicans would like you to think of regulations as job killing burdensome rules placed on businesses by an oppressive government. However, when you hear the word regulation what you should be thinking of is “protection”. Regulations are laws and rules set in place in order to “protect” the public from harm. The Environmental Protection Agency, for instance, establishes rules in order to protect our waterways from being overly polluted, the Food and Drug Administration establishes rules to protect the food we eat and the prescription drugs we take from harming our bodies. No matter what end of the political spectrum you find yourself, all of us should be capable of understanding the necessity of providing universal protections for the public. After all, government regulations were developed for a reason.
Before the advent of government regulations, the public was forced to contend with out-of-control corporations which placed greed and profits over the wellbeing of the general public. For instance, in 1938, the Fair Labor Standards Act was authorized to provide workers protection and regulate child labor. Before this regulation, it was common place for factory managers to place small children inside industrial equipment in order to make repairs. Accidents would occur regularly leading to the deaths of these small kids. Regulations were also required in the area of banking. After the stock market crash of 1929, it became apparent that greed on Wall Street encouraged bankers to engage in risky investments which eventually lead to the crash and wiped out the savings of thousands of Americans. Because of the regulations we enjoy today (such as FDIC insurance) it’s hard for us to imagine what it would be like to walk into a bank and be told that all your money is gone and there is nothing you could do to get it back. But, unfortunately, this was the life of Americans before banking regulation.
The stock market crash of 1929 also highlighted the need for regulators to establish rules separating commercial banking from the more riskier investment banking. Congress enacted the Glass-Steagall Act or the Banking Act of 1933 in order to achieve these protections by prohibiting bank sales of securities, establishing deposit insurance, and separating risky forms of banking from traditional banking. After the enactment of post-depression era regulations and higher corporate tax rates, the American public enjoyed several decades of prosperity and middleclass growth. This was until the late 1990’s when the banking industry in this country yet again lobbied for less government regulation in the banking sector.
In 1999, Congress passed the Gramm-Leach-Bailey Act which rolled back portions of Glass-Steagall and allowed bank and securities companies to once again combine business as well as changing Bank Holding company rules and allowing banks and insurance companies to engage in financial servicing. Overnight there was an explosion of new financial services emerging throughout the country. Insurance companies like AIG were now providing financial insurance for newly created exotic instruments which were extremely risky. At the time, the head of the Commodity Futures Trading Commission (Brooksley Born) fought for more intense regulation over the derivatives market and credit default swaps. Unfortunately, these regulations were never put in place and several years later risky behavior and outright fraud in the Wall Street derivatives market would play a major role in the economic collapse of 2008.
After winning election and entering office, President Obama moved quickly to repair the damage done by not having reasonable protections in place over the banking industry. In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act which broadened regulations over Wall Street, created more oversight, and streamlined enforcement. The Act also established new financial protections for consumers through the Bureau of Consumer Financial Protection which regulates payday lenders, mortgage companies, credit cards, student loans and other financial services. The bureau ensure that consumers have the information they need in order to avoid being taken advantage of by greedy companies seeking to charge exorbitant fees and interest. The Act also mandates an end to taxpayer funded bailouts of financial institutions and places limits on executive compensation for Wall Street bankers.
This week, while most of the nation’s attention was focused on the Trump/Russian scandal, House Republicans, with the support of Donald Trump, passed the Financial CHOICE Act which seeks to literally dismantle the consumer protections which were enacted by Dodd-Frank. The bill, yet again, provides the deregulation Wall Street banks constantly lobby Washington for, and opens the American public up to losing protections which have assisted in preventing another economic collapse. This serves as another example of Trump and the Republicans placing wealthy establishment elites over the American people. We the people lose protections while the wealthy elites earn profits! Despite his promise to lookout for the working-class in this country, Donald Trump demonstrates each day that he is determined to do the bidding of the same establishment he railed against throughout the Presidential campaign. The CHOICE Act is just one more example which proves that this administration has completely abandoned the American working-class.