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:

  1. Eliminates a perpetual system of government sponsored corporate bailouts financed by the government or private industry.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. Establish a timeline for the resolution of Fannie Mae and Freddie Mac.
  7. Mandate that credit rating agencies be subject to the same legal standards as other market participants.
  8. 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