Temporary fix won’t solve Wall Street’s continuing problems
It has been several years since the recession first hit the United States and Wall Street ran amok, yet little has been done to prevent such a crisis from recurring. The Dodd-Frank Wall Street Reform Act passed last July; however, instead of addressing the poor business practices of Wall Street banks and the lack of risk their executives carry, it merely adds more red tape and makes them more accountable for fraud.
Rep. Paul Ryan put it best when he said that Dodd-Frank “only amplifies ‘Too big to fail.’ It’s setting us up for worse.”
Ryan says Dodd-Frank attempts to address the issue but falls short; instead, the answer is a market-based solution that keeps risk attached to the top executives, preventing them from gambling with their companies. This alone will prevent a repeat of the trading of worthless mortgage-backed securities and the subsequent housing market collapse.
Furthermore, Ryan and many others believe most of the bailouts and the Troubled Asset Relief Program (TARP) were unnecessary. While the program was successful, turned a surplus and most that received bailout money have repaid it with interest, it was not the government’s job to do this. A better option for the government to undertake, according to Ryan and David Pommerehn of the Consumer Banks Association, is to break large, failing banks into smaller entities, hopefully preventing the whole from collapsing and mitigating the damage.
“It’s not the government’s job to bailout failing banks. Some argue it’s actually the opposite; it’s our job to let them fail,” stated Pommerehn. “The longer you prolong the failure, the worse the market will get.”
What has been done is only temporary; like all else, it’s time to face the problems and not their symptoms.