Washington, D.C., December 18, 2014 – Dennis Kelleher, President and CEO of Better Markets, made the following statement today on the Federal Reserve Board’s latest extension for Wall Street’s biggest banks to comply with the financial reform law:
“The refusal or inability of Wall Street’s biggest too big to fail banks to comply with the financial reform law is just more evidence of the serious threat they still pose to the financial system and taxpayers. This latest extension means that these taxpayer-backed Wall Street banks have massive investments that they cannot dispose of in less than seven years. This proves the wisdom of the law in prohibiting such illiquid, impossible to sell and difficult to value investments, a high risk activity in normal times and a disaster in times of market stress when asset liquidity can mean the difference between a bank failing or not and, therefore, needing bailouts or not,” said Dennis Kelleher, President and CEO of Better Markets, an independent nonprofit organization that promotes the public interest in the financial markets.
“The law required these few megabanks to dispose of their investments in hedge funds and similar investment vehicles within four years. However, if those investments were so illiquid or otherwise impossible to sell, then the law authorized the Federal Reserve Board to give up to three one year extensions. It was expected that each one of those one-year extensions would be based on objective facts particularized to each investment at each bank that demonstrated the impossibility of complying and, therefore, the need for a one-year extension. It is a troubling sign that the Fed granted a two-year blanket extension without requiring a public application, justification and determination establishing the basis for the failure to comply with the law,” Mr. Kelleher said.
“The American people have already suffered too much from the high risk and often reckless trading and investments by Wall Street’s too big to fail banks. This part of the law is directly targeted at reducing those types of activities and risks. Seven years is simply too long. As a condition of granting the extensions, the Fed should require these banks to immediately comply with the law to the greatest extent possible and to publicly disclose the factual basis that purportedly demonstrates the need for the extension for any investments where compliance is not immediate,” Mr. Kelleher concluded.
Better Markets is an independent, nonprofit, nonpartisan organization that promotes the public interest in financial reform in the domestic and global capital and commodity markets. Better Markets advocates for transparency, oversight and accountability with the goal of a stronger, safer financial system that is less prone to crisis and failure thereby eliminating or minimizing the need for more taxpayer funded bailouts. To learn more, visit www.bettermarkets.com.