Merkley, Levin: Ban on High Risk Trades Victory for Workers and Businesses

Friday, June 25, 2010

WASHINGTON, DC – Early this morning, a House-Senate conference committee completed work on legislation to reform the practices of Wall Street. The conference report contains provisions similar to those laid out earlier this year by Oregon Senator Jeff Merkley and Michigan Senator Carl Levin. Senators Merkley and Levin issued the following joint statement on the conference report:

“The inclusion of a ban on proprietary trading is a victory. If implemented effectively, it will significantly reduce systemic risk to our financial system and protect American taxpayers and businesses from Wall Street’s risky bets. This is an important step forward from the current system that has placed few limits on speculative trading by either banks or other financial firms. Now banks will be prohibited from doing these trades and other financial giants will have to put aside the capital to back up their bets.

“Unfortunately, there is some danger to the principle posed by a loophole that allows for so-called ‘de minimis’ investing. While the overall Merkley-Levin framework is stronger than either the House or Senate bills, we will now be dependent on regulators to make sure that this exception does not weaken the rule.

“We are also pleased that the conference report includes strong language to prevent the obscene conflicts of interest revealed in the Permanent Subcommittee on Investigations hearing with Goldman Sachs. This is an important victory for fairness for investors such as pension funds and for the integrity of the financial system. As the Goldman Sachs investigation showed, business as usual on Wall Street has for too long allowed banks to create instruments which are based on junky assets, then sell them to clients, and bet against their own clients by betting on their failure. The measure approved by the conferees ends that type of conflict which Wall Street has engaged in.

“Over the last year, there has been a great deal of movement in the direction of ending the practices that caused our current economic crisis. The risky trades of Wall Street directly contributed to the high unemployment, record foreclosures and sluggish lending we see today. The limits imposed by the conference report will help rein in this practice and establish a stronger financial foundation for our working families.”