Subject:
Regulate OTC Derivatives; "Too Big To Fail" is unacceptable
To:
President Barack Obama
Sen. Arlen Specter
Sen. Robert Casey
Rep. Joseph Pitts
November 3, 2009
The American Economy was brought to its knees last year by the grossly irresponsible behavior of some of the largest firms on Wall Street. Investment banks took on extraordinary amounts of leverage tied to secretive and labyrinthine mortgage derivatives products, traded largely in the dark, on the Over-The-Counter (OTC) market, out of the sight of federal regulators.
No one likes a taxpayer-funded bailout. But, given the scale of the unfolding calamity, many of these institutions were indeed "too big to fail." Now that billions of dollars in taxpayer money has been spent to put out the fire, it is imperative that we prevent this from happening again.
The Commodity Futures Trading Commission (CTFC), the SEC, or one of the proposed new federal bank regulators must be given oversight of the OTC derivatives market. This was proposed back in the 1990s but rejected by Alan Greenspan and Robert Rubin in the name of free market absolutism. It was a monumental mistake.
Secondly, giant investment banks must either be broken up or be made subject to strict new capital reserve requirements. Firms must be able to come and go without posing extraordinary systemic risk, requiring massive corporate welfare payments from the American people. As you know, many of your constituents are quite angry about this.
I ask that you act to prevent such a crisis from occurring again, and I would like to inquire what steps you are taking toward this end.
Lancaster , PA
|
