The Senate Permanent Subcommittee on Investigations, which I chair, held landmark hearings in 2010 into the causes and consequences of the financial crisis. Those hearings built a strong case for Wall Street reform, and I have focused on several changes to rein in the abuses discovered in the Subcommittee’s investigation, including:

• Preventing risky proprietary trading and conflicts of interest: With Sen. Jeff Merkley of Oregon, I introduced legislation, included in the Dodd-Frank Act, to rein in risky trading that financial firms have engaged in not to serve customers, but to boost their own profits. Those trades reaped big profits for banks for many years, but when their risky bets failed, they needed taxpayer support to survive. The Merkley-Levin language also bars financial firms from creating complex financial instruments, selling them to clients and then placing bets against those very same instruments, a conflict of interest that helped exacerbate the financial crisis. 
• Mortgage reform: The Subcommittee’s investigation demonstrated how mortgage lenders engaged in risky behavior that harmed consumers and helped lead to the financial collapse. I supported provisions in the Dodd-Frank Act to establish a consumer financial protection agency to limit such abuses; to require lenders to hold onto a portion of their loan portfolios instead of making risky loans and then selling them to limit their own risk; to bar “liar loans” requiring no evidence of income or assets from the borrower; and to end lender practices that encourage issuers to market mortgages that borrowers are less likely to repay. 
• Credit rating agency reform: The Subcommittee’s investigation showed how failures at credit rating agencies helped hide and spread the risk of mortgage-backed securities throughout the financial system. The investigation found that these agencies, which supposedly supply expert and objective analysts of credit risk, used faulty risk models and assigned super-safe AAA ratings to products later revealed to be little better than junk. I supported provisions in the Dodd-Frank Act that set up a new office in the Securities and Exchange Commission to oversee and examine the work of the credit rating agencies; require the agencies to disclose their methodology and their track records; allow investors to file private causes of action against agencies that fail to thoroughly investigate products they rate; and task the SEC with examining the conflict of interest involved in Wall Street firms shopping for the highest rating among the various rating agencies.
• Fixing bank regulation: The Subcommittee found that regulators such as the Office of Thrift Supervision failed to rein in the risky Wall Street practices that led to the financial crisis, even when regulators had identified the risks. In addition, a new Financial Stability Oversight Council will have broad authority to monitor individual financial institutions as well as the system at large to catch problematic practices such as high-risk lending before they endanger the financial system as a whole. 
• Regulating derivatives: Among the causes of the financial crisis was Wall Street’s use of extraordinarily complex derivatives – financial instruments that derive their value from other financial instruments. These derivatives were largely shielded from scrutiny in an opaque marketplace. I supported the Dodd-Frank Act’s measures to bring transparency and accountability to the derivatives market.

The Dodd-Frank Act will put a cop back on the beat on Wall Street.  Many of the provisions of the Dodd-Frank Act give regulatory agencies significant authority to craft regulations for implementing the new law. I am focused on ensuring that the legal requirements of the bill are turned into forceful regulations that meet Congress’s intent, I’m working to make sure that regulators have the resources they need to enforce the law.

Feedback