The Senator Who Warned that Wall Street Risk-Taking Would Lead to the Economic Crisis Condemns Congressman Toomey’s Call for more Destructive Deregulation
“I think we will look back in 10 years’ time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930s is true in 2010. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness.”
~ Senator Byron Dorgan, Floor Speech [New York Times, 11/05/99]
PHILADELPHIA, Pa. – Sen. Byron Dorgan (D-N.D.), a longtime independent voice in the Senate who predicted the dire consequences of creating “too big to fail” banks and hazards of exposing commercial banks to the risky Wall Street gambling, will campaign with Joe Sestak tomorrow.
“I am honored to have Senator Dorgan stand with me today,” said Admiral Sestak. “His independent pragmatic approach and his willingness to stand up to both Wall Street and the political establishment are the definition of responsible leadership. We need more people in the Senate will put middle class Americans over Wall Street.”
Senator Dorgan stood up to the establishment and sounded alarm bells during the 1999 debate over modernizing the banking industry. In 1999, Dorgan opposed the legislation that broke down the wall between commercial banks and investment firms – a bill that Congressman Toomey help draft – which allowed banks to engage in the risky practices that led to the recession.
At the time, Dorgan predicted that: “I think we will look back in 10 years’ time and say we should not have done this, but we did because we forgot the lessons of the past, and that that which is true in the 1930s is true in 2010. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness.” [New York Times, 11/05/99]
Click here to see Senator Dorgan speak on the floor against the legislation.
Over the course of his three terms, Senator Dorgan has received praise from both sides of the aisle for his advocacy for strong fiscal policies, including ensuring that corporations do not gamble with America’s financial future.
After the collapse, Congressman Toomey continued to push for deregulatory steps like the 1999 legislation, which repealed the Glass-Steagall Act.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. [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].
Joe Sestak was elected to Congress in 2006 after a distinguished 31-year career in the United States Navy, and he is honored to represent the Southeastern Pennsylvania district where he was born and raised. He is a Democratic candidate for the U.S. Senate seat from Pennsylvania. During his Navy career, Joe attained the rank of 3-star Admiral, served in the White House as Director for Defense Policy on President Clinton’s National Security Council, served in the Pentagon as Deputy Chief of Naval Operations, and led a series of operational commands at sea, culminating in command of the USS George Washington Aircraft Carrier Battle Group (30 ships, 100 aircraft, and 15,000 sailors/marines/aviators/SEALs) during combat operations in Afghanistan and Iraq. In our nation’s time of crisis in the immediate aftermath of 9/11, the Navy turned to Joe Sestak to serve as the first Director of “Deep Blue,” the Navy anti-terrorism unit formed in response to the attacks. Joe is the highest-ranking former military officer ever elected to either branch of Congress. He graduated second in his class from the U.S. Naval Academy and holds a Master’s in Public Administration and a PhD in Political Economy and Government from Harvard University. Joe lives in Delaware County, Pennsylvania, with his wife, Susan, and daughter, Alex, and proudly represents the 7th District, where his mother and many of his seven siblings still reside.