Democratic candidate for Congress David Cicilline issued the following statement today following reports that Wall Street firms were still placing the same types of proprietary bets that contributed to the financial crisis:
“A few weeks ago, Congress passed and President Obama signed into law an expansive financial reform bill that will help end the era of too big to fail and provide strong protections for American consumers. But today’s reports reveal that even before the ink on the bill is dry, Wall Street has started looking for loopholes so they can continue placing the types of potentially lucrative, but extremely risky bets that helped get us into this mess in the first place.”
“Although the reform bill attempted to keep federally insured banks from using their own funds to make speculative investments, Wall Street firms such as JPMorgan Chase and Goldman Sachs have already begun to place the exact same types of bets (known as proprietary trades) using their own money on behalf of clients. While these types of risky wagers offer a potential windfall to well-financed investors, they are also potentially destabilizing to the financial system as a whole due to the huge losses they could incur. According to the New York Times, JPMorgan Chase and Goldman each lost more than $100 million on these bets from April through July.”
“Congress should act quickly to address this issue and guarantee that Wall Street firms are not able to destabilize the markets by continuing to make the types of massive, reckless bets with their own money that helped push the financial system to the brink less than two years ago. If I am fortunate enough to be elected to Congress this fall, I will fight to guarantee that the culture of excess on Wall Street never again threatens the stability of Main Street and that we maintain stringent oversight of Wall Street so another financial crisis does not occur.”
