The Agenda Project: Senators Reid & McConnell, Repair the Foundation of Our Economy

Effective financial markets are the bedrock of our economy. Transparency, competition, information flow and the discipline of failure are critical to well functioning markets. For several years, the U.S. financial markets have not been subject to these principles. As a result, nineteen months ago, they suffered a collapse that decimated the U.S. economy.

Legislation currently under consideration in the Senate would not have prevented the crisis we just had. As such, it is unlikely to prevent a future crisis.

Sign the letter below and join leading financiers, market experts, and former regulators from both political parties in demanding that Senators restore the integrity of our financial markets and lay the foundation for our economic recovery.

- Erica Payne
Founder
The Agenda Project

April 15, 2010

The Honorable Harry Reid
United States Senate
Washington, D.C. 20510

The Honorable Mitch McConnell
United States Senate
Washington, DC 20510

Dear Senators Reid and McConnell:

Nineteen months after the most devastating financial crisis since the Great Depression, our financial system remains at risk. Neither the bill passed earlier this year by the House, nor the one currently under consideration in the Senate would have prevented the crisis. Without serious restructuring, they will not prevent a future crisis.

Sound financial markets are the bedrock of a strong economy. Over the last decade, under both Democratic and Republican leadership, our financial sector moved away from core market principles - transparency, competition, free flow of information and the essential discipline of failure - that allowed the US economy to thrive. Restoring the integrity of our financial markets and providing the foundation for economic recovery, requires re-committing to these principles.

We, the undersigned, call on you to fulfill the responsibilities of your position by joining together in non-partisan cooperation to pass legislation that AT A MINIMUM would have prevented the crisis we just endured. Such legislation must include ALL of the following reforms or be considered incomplete:

Eliminates a perpetual system of government sponsored corporate bailouts financed by the government or private industry.
Increase minimum capital requirements for banks to no less than 8%. Apply additional risk-weighted capital requirements for: a) risk concentration, b) significant interconnectedness with other financial institutions and c) illiquidity which assumes a decline in collateral values. Create standard metrics for these variables.
Require on balance sheet reporting of all liabilities with disclosure of related material information including all contingent claims (including but not limited to swaps, SIVs and VIEs). Provide a private right of action for failure to comply and for knowingly aiding and abetting securities fraud.
Require all standardized derivatives to be traded over exchanges and central clearinghouses with pricing transparent to market participants include a strong presumption that most existing OTC transactions would be standardized. Require all inter-bank and inter-dealer contingent claims (including but not limited to derivative and swap transactions) that cannot be standardized to be reported on a daily basis to a regulated transparent clearinghouse. Mandate significant and consistent margin and regulatory requirements across standardized and OTC contingent claim transactions.
Create standardized Pooling and Servicing Agreements and mandate the timely availability of electronically usable loan level information for asset backed securities, covered bond and similarly structured transactions prior to sale. Provide a private right of action and personal liability for sponsors of securitized underwritings.
Establish a timeline for the resolution of Fannie Mae and Freddie Mac.
Mandate that credit rating agencies be subject to the same legal standards as other market participants.
Mandate a separation of the roles of Chairman of the Board and CEO for regulated financial institutions.

Without these reforms, our economy remains at risk.

We would like to meet with you at your earliest convenience to discuss these concerns.

Sincerely,

Marcellus Andrews Barnard College	Marshall Auerbach Senior Fellow The Roosevelt Institute Global Portfolio Strategist RAB Capital	Dean Baker Co-Director Center for Economic and Policy Research
Dan Berger Managing Principal Berger & Montague, PC	William Black Associate Prof. of Economics and Law University of Missouri-Kansas City Contributor New Deal 2.0 Former Senior Financial Regulator	Margaret Cannella Former Managing Director and Global Head of Credit Research and U.S. Corporate Strategy JPMorgan
Timothy A. Canova Betty Hutton Williams Professor of International Economic Law Chapman University School of Law	Jim Chanos Founder and President Kynikos Associates	Bowman Cutter Senior Fellow The Roosevelt Institute Former Managing Director Warburg Pincus
Raj Date Chairman and Executive Director Cambridge Winter Center	Barry Eichengreen Department of Economics University of California	Thomas Ferguson Professor of Political Science University of Massachusetts, Boston Senior Fellow The Roosevelt Institute
Jerome S. Fons Advisor K2 Global Partners Former Managing Director Moody's Investors Service	Michael Greenberger Law School Professor University of Maryland School of Law Former Division Director CFTC	Teresa Ghilarducci Schwartz Professor of Economic Analysis The New School
Geoffrey Heal Paul Garrett Professor of Public Policy and Corporate Responsibility Columbia Business School	Leo Hindery Chairman, The US Economy/Smart Globalization Initiative New America Foundation	Arjun Jayadev Fellow Roosevelt Institute University of Massachusetts, Boston
Rob Johnson Senior Fellow and Director of the Project on Global Finance The Roosevelt Institute Former Chief Economist Senate Banking Committee	Ethan Kaplan Columbia University	Mike Konczal Fellow The Roosevelt Institute
Jan Kregel Levy Economics Institute of Bard College	Robert Kuttner Former Chief Investigator Senate Banking Committee Co-editor The American Prospect	Henry C K Liu Chairman Liu Investment Group
Dariush P. Maanavi Former Managing Director and Head of Corporate Equity Derivatives Merrill Lynch	Jeff Madrick Senior Fellow The Roosevelt Institute Editor Challenge Magazine	Jamie Mai Founder and President Cornwall Capital
Frank Partnoy Professor of Law and Finance University of San Diego	Robert E. Prasch Professor of Economics Department of Economics Middlebury College	Robert Reich Professor of Public Policy, Goldman School of Public Policy University of California Berkeley Former U.S. Secretary of Labor
Josh Rosner Managing Director Graham Fisher & Co.	Peter Solomon Founder and Chairman Peter J Solomon Company	Walker F. Todd Attorney and Economist Former Legal and Research Officer Fed. Reserve Banks of NY and Cleveland
Lynn Turner Former Chief Accountant SEC	Lawrence J. White Professor of Economics Stern School of Business, New York University	Randall Wray Professor of Economics University of Missouri-Kansas City

Jim Chanos
Founder and President
Kynikos Associates

Bowman Cutter
Senior Fellow
The Roosevelt Institute
Former Managing Director
Warburg Pincus

Raj Date
Chairman and Executive Director
Cambridge Winter Center

Michael Greenberger
Law School Professor
University of Maryland School of Law
Former Division Director
CFTC

Rob Johnson
Senior Fellow and Director
of the Project on Global Finance
The Roosevelt Institute
Former Chief Economist
Senate Banking Committee

Dariush P. Maanavi
Former Managing Director and Head of Corporate Equity Derivatives
Merrill Lynch

Frank Partnoy
Professor of Law and Finance
University of San Diego

Josh Rosner
Managing Director
Graham Fisher & Co.

Peter Solomon
Founder and Chairman
Peter J Solomon Company

Walker F. Todd
Attorney and Economist
Former Legal and Research Officer
Fed. Reserve Banks of NY and Cleveland