U.S. Sen. Pat Toomey on Monday reiterated his longstanding message that more regulation is not the solution to banking mistakes such as JPMorgan Chase’s recent $2 billion loss.
The Pennsylvania Republican has fought for less regulation in the financial industry since the late 1990s when he began his career in public office.
Toomey, who dealt with currency and interest rate swaps on Wall Street before entering politics, asked Congress in 2000 to pass legislation to eliminate the “cloud of legal and regularity uncertainty that has shadowed” the derivatives market.
A lot has happened since then — such as the 2008 economic collapse — but Toomey’s solution remained the same speaking Monday with The Express-Times’ editorial board: fewer regulations.
Toomey said attempts by the U.S. Congress to “micromanage” the financial industry, through regulation like the Dodd-Frank Act, are doomed to fail.
“We’ll tell them exactly what they can do and under what circumstances,” Toomey said of current policies enacted by Congress. “It’s a staggering burden they’ve taken on, to which they (legislators) are completely incompetent.”
JPMorgan Chase’s announcement it lost $2 billion from trading in credit derivatives was just one example of Dodd-Frank’s failure, Toomey said.
“An institution that makes mistakes ought to be allowed to fail,” he said. “The only people that should suffer are the investors.”
Toomey, who represented the Lehigh Valley in the House of Representatives from 1999 to 2005, began the fight to repeal the Depression era Glass-Steagall Act in 1999, which allowed investment and commercial banking to combine.
When Barack Obama ran for president in 2008, he told a crowd in New York City the repeal of Glass-Steagall only facilitated mergers, according to The New York Times.
“Instead of establishing a 21st century regulatory framework, we simply dismantled the old one,” Obama said, noting it encouraged “a winner take all, anything goes environment that helped foster devastating dislocations in our economy.”
Dodd-Frank, which was signed by Obama in 2010, required increased transparency of the derivatives market, created a new consumer protection agency, and placed limits on speculative investments. Many of the new rules authorized by the more than 2,100-page legislation are still being written.
Toomey, elected in 2010, said his solution is tougher capital requirements for banks. He said by doing that it would diminish their leverage and create a “disincentive to always grow.”