And, the report warns, "[s]hould one of these giant banking firms fail again, it appears that the damage will not be contained."
"Avoiding another meltdown depends on the will of federal regulators to use the new powers they were granted in the Dodd-Frank Wall Street Reform and Consumer Protection Act," said Jennifer Taub, author of the report and professor of law at Vermont Law School. "If they behave as if they are beholden to the banks, we will likely face a more severe crisis in the future."
Taub, also the author of the financial crisis book Other People’s Houses, highlights—"in plain language"—key regulatory reforms necessary to avert another crisis, including:
- ending bailouts by requiring the largest banks to provide credible "living wills" that show how they can file for bankruptcy or be resolved by the FDIC without triggering a financial crisis;
- further reducing excessive borrowing by the top six banks;
- reducing dependence by banks and other financial firms on overnight and other short-term borrowing;
- prohibiting banks from evading derivatives regulation through use of foreign subsidiaries;
- improving bankers' accountability through rules around incentive pay and bonuses;
- requiring corporate political spending disclosure "so as to begin to deal with the influence peddling that impacts Congress and regulators"