Labor and its allies are making it clear that curbing the power of the nation's finance industry will do much more to lift the country out of the economic sink hole than what they see as misguided efforts by some to focus on federal budget deficits.
The labor-led Americans for Finance Reform said this week that the people cannot accept soaring profits for companies like Goldman Sachs and J.P. Morgan Chase, which reported profits of $3.2 billion and $3.6 billion in the 3rd quarter while jobless numbers go through the roof. They are saying it is a finance industry out of control that is responsible for the record unemployment, home foreclosures, shut down of family farms, disappearing pension funds, evaporated savings, frozen credit lines, shuttering of plants, and ruined cities and towns that now describe life in America.
"They've lost their homes, they've lost their jobs, they've lost their ability to pay for their kids' college education," declared Senate Banking Committee Chairman Christopher Dodd, D-Conn., when his Senate Banking Committee released a draft financial regulatory reform bill last week. "They've stood by as some of those who caused this mess got billion-dollar bailouts and million-dollar bonuses. And they're asking ‘What can our government do to protect us?'"
AFL-CIO President Richard Trumka and Americans for Financial Reform have already praised the draft bill released by Dodd but they are warning that there will be moves to weaken it.
The draft parallels the financial re-regulation plan proposed earlier this year by President Obama.
Heather Booth, chair of Americans for Financial Reform, also applauded the draft bill, saying, "It's designed to try to prevent a repeat of the financial finagling and casino gambling-like industry practices that caused the financial crash and Great Recession a year ago."
Trumka described the legislation as "a very significant step forward toward the kind of strong, comprehensive financial regulation our country needs if we are to turn away from the practices that led to the economic crisis that did such harm to working people."
In October the House Financial Services Committee passed a similar package of financial regulatory measures.
The work of both the House committee and Dodd's committee, however, is generating fierce and well-financed opposition from banks and financial service firms, including ones that were bailed out by taxpayers.
"Dodd's bill embodies key recommendations of the Obama administration's White Paper in critical areas like the creation of a new consumer financial protection agency and the regulation of derivatives. Furthermore, the bill addresses the clear need for systematic risk regulation and resolution authority that holds failing institutions accountable, and does so through creation of a fully public body," Trumka said.
Dodd noted, in his press conference last week, that his bill would empower that new consumer board, working together with leaders of the Federal Reserve and other financial regulators, to blow the whistle in advance on dangerous practices in such institutions and dismantle, in orderly fashion, those that are "too big to fail."
"This sets us on a path to rein in Wall Street," said Booth, whose coalition includes more than 200 organizations, in a phone interview. "It puts in protections for Main Street and helps ensure that the big banks cannot bring our economy to the brink of collapse again. We are particularly pleased that it includes a strong Consumer Financial Protection Agency. That is a fundamental cornerstone of any real reform and must be included in any final legislation."
Booth said that "the proposal begins to address the problems of the unregulated derivatives markets, playing with the economy like a big banker's personal casino, gambling with our retirement plans, college savings and homes. This draft will move us toward the open trading of derivatives, requiring transparency and accountability. And it begins to address the problems of systemic risk, and wind down failing institutions without future taxpayer bailout."
The Dodd plan, which had the backing of all the committee's Democrats but was backed by no Republicans, also requires advisory shareholder votes on pay and perks given to corporate executives.
The author of that provision, Sen. Charles Schumer, D-N.Y., was asked at the press conference why the shareholder votes on pay and perks were only "advisory."
"Any CEO and management who rejects what the shareholders say does it at their own risk," he replied.
Dodd said the problems with financial regulation in the country go back to well before the recent period of rampant deregulation and speculation.
"The financial crisis exposed problems in the regulatory structure created over many years," he said. "The structure of the agencies erected to supervise the financial system was put up piecemeal. It needs to be pulled together."
Many progressives are happier with the Dodd bill than with the version that exists in the House because, they say, the House bill gives too much power to the Federal Reserve to fix problems that the senators say were actually created by the Federal Reserve.
Many of the senators on the Dodd committee said that the Fed was responsible for lax oversight of financial institutions and Dodd, himself, said the Fed is so overstretched after buying bad corporate assets that it is not in the best position to pull the country out of a recession.
"In the future, the Fed should stick to its core function of regulating the money supply," Dodd said.