On Anniversary of Wall Street Debacle, Morning Call Reports Toomey Wants U.S. to Imitate Hong Kong, Deregulate More

MEDIA, Pa. — Just two years after the financial meltdown that left Pennsylvanians struggling to make ends meet, Congressman Toomey urges more deregulation. This time, he takes his efforts to promote Wall Street a step further by suggesting that the United States should adopt a lax regulatory system more like they have in his former home, Hong Kong. 

On September 25, 2008, the New York Times reported: “Washington Mutual, the giant lender that came to symbolize the excesses of the mortgage boom, was seized by federal regulators … in what is by far the largest bank failure in American history.” [New York Times, 9/28/08]

Just this weekend, the Morning Call reports that Congressman Toomey wants a regulatory system more like Hong Kong. “I was seeing pretty close up which economies were succeeding and which ones weren’t, and there is an unmistakable correlation,” Toomey said. “Those that are heavily regulated and centrally controlled underperform. And those like Hong Kong, where there is regulation but it is sensible, they thrive.” [Allentown Morning Call, 9/26/10]

“After a career on Wall Street and Hong Kong, Congressman Toomey is clearly out of touch with Pennsylvania and recent history,” said Sestak spokesman Jonathon Dworkin. “The fact is Toomey fought to weaken the rules that protected middle class savings for decades.  Now he wants more of the same.  It’s time for a problem solver like Joe Sestak who will put average Pennsylvanians first.”

Congressman Toomey helped write the legislation that broke down the wall between commercial banks and investment firms, allowing commercial banks – where the majority of Americans go to protect their savings – to engage in the risky activities previously limited to investment banks. [HR 10 Gramm-Leach-Bliley/Financial Services Modernization Act, enacted 11/12/99; House of Representatives Biography, U.S. Representative Patrick J. Toomey]

Congressman Toomey voted for legislation which deregulated derivative trading and allowed Wall Street firms to increase the kind of risk-taking which led to the economic crisis. [Commodities Futures Modernization Act, HR 4541, House Vote 540, 10/19/00]

After the collapse, Congressman Toomey continued to push for deregulatory steps like the 1999 legislation, which repealed the Glass-Steagall Act. According to the Scranton Times Tribune: “Mr. Toomey also said he would continue to generally favor deregulation of the nation’s financial markets, despite a collapse that many blame on a failure of regulation.”  [Scranton Times Tribune, 4/16/09]. Click here to see Toomey speak in favor of deregulation. 

Congressman Toomey’s Long History of Deregulation

Congressman Toomey opposed the recent Wall Street Reform and Consumer Protection Act bill to repair the system. The bill aimed to put an end to “too big to fail,” provide greater transparency and accountability for over-the-counter derivatives, protect consumers and give shareholders a say on bonuses. [Talking Points Memo, 7/15/10; Wall Street Reform and Consumer Protection Act, HR 4173, passed 12/11/09]

Congressman Toomey helped write the legislation that broke down the wall between commercial banks and investment firms, allowing commercial banks – where the majority of Americans go to protect their savings – to engage in the risky activities previously limited to investment banks. [HR 10 Gramm-Leach-Bliley/Financial Services Modernization Act, enacted 11/12/99]

Congressman Toomey himself wrote in his book The Road to Prosperity that: “Major deregulation was another part of the expansion of economic freedom that enabled strong growth.” [pg. 41]

Congressman Toomey voted for legislation which deregulated derivative trading and allowed Wall Street firms to increase the kind of risk-taking which led to the economic crisis. [Commodities Futures Modernization Act, HR 4541, #540, 10/19/2000]

After the collapse, Congressman Toomey said he continues to favor deregulation of financial markets. According to the Scranton Times Tribune: “Mr. Toomey also said he would continue to generally favor deregulation of the nation’s financial markets, despite a collapse that many blame on a failure of regulation.”  [Scranton Times Tribune, 4/16/09]

What Others Have Said About Deregulation

“Deregulation has not worked. Unfettered markets may produce big bonuses for CEOs, but they do not lead, as if by an invisible hand, to societal well-being. Until we achieve a better balance between markets and government, the world will continue to pay a high price.” – Joseph E. Stiglitz, Nobel Laureate in economics and chairman of President Clinton’s Council of Economic Advisers [Project Sydicate, 2/01/08]
“… deregulation in effect gave the [savings and loan] industry – whose deposits were federally insured – a license to gamble with taxpayers’ money, at best, or simply to loot it, at worst.” – Paul Krugman, Nobel Laureate in economics and professor at Princeton University [New York Times, 6/01/2009]

“The assumption has been markets know best, and when they don’t civil lawsuits and government prosecutions will deter wrongdoing. Wrong. When shareholders demand the highest returns possible and executive pay is linked to stock performance, many companies will do whatever necessary to squeeze out added profits.” – Robert Reich, former labor secretary under President Clinton and professor of public policy at the University of California at Berkeley [Christian Science Monitor, 5/04/10]

American International Group “neither hedged nor provided adequate capital against the large, correlated risks that it was taking. AIG’s actions were facilitated by gaps in prudential regulation … The consequences for the broader system were so severe because AIG was a large financial firm closely interlinked with other systemically important financial institutions and markets.” – Federal Reserve Chairman Ben Bernanke [Congressional Testimony, 09/02/10].