Senate Democrats

Reid: Wall Street Excesses Show Disconnect With Main Street

Washington, D.C.—Senate Majority Leader Harry Reid made the following remarks on the Senate floor this afternoon.  Below are his remarks as prepared for delivery:

“The global economic crisis is a complicated one.  It was born of both brazen, unabashed abuses and elaborate schemes alike.  It brought complex concepts like ‘mortgage-backed securities’ and ‘credit default swaps’ and ‘derivatives trading’ into our everyday vocabulary.
“But when we peel back all the layers of this crisis, its foundation is nothing more than a simple concept: Greed.  When we cut through to the root cause of why so many families are hurting, why so many businesses are suffering, the core elements are evident:  Excess.  Irresponsibility.  Reckless risk.
“Wall Street ran wild, then it ran out of steam.  Last year’s emergency required an urgent dose of medicine, and we supplied it.  Our entire national economy was on the brink, and our swift action prevented a terrible situation from getting even worse.  For the past year we have continued to act in strong, sensible and prudent ways.
“We taxpayers did what we needed to do keep the economy afloat, and didn’t even ask much from Wall Street in return.  We would have gladly accepted a simple ‘thank you.’
“So you can understand America’s disgust upon realizing in recent days that Wall Street has ignored the lessons of last year.
“Reckless Wall Street traders continue to write themselves checks for billions of dollars – much of it, our dollars.
“The Wall Street Journal found that major banks and securities firms are going to pay their employees $140 billion this year – that’s a record high, and 20 percent more than last year.
“But the greed is evident not only in salaries – it’s in bonuses and other benefits, too.  The Washington Post reported that the nation’s biggest financial firms – including the firms that took nearly half of the emergency TARP money – are actually increasing the perks they are handing out to their employees this year.
“Here’s what’s happening on Wall Street today: CEOs are giving their traders huge incentives – usually cash bonuses – to swing for the fences and made deals that put their entire firms – and the larger system – at risk.  That’s the height of irresponsibility.  It is the height of arrogance.
“Risky bets on exotic securities are precisely what sparked the financial crisis and fueled the housing crisis.   These events devastated Nevada and so many other states.  But that same carelessness continues on Wall Street today.
“A gluttonous glorification of the bottom line led to the credit crisis that sent so many hardworking families into bankruptcy, and worse.  But that same narrow-mindedness continues to guide financial firms today.
“Short selling and shortsightedness – rewarded with stratospheric salaries and bloated bonuses – contributed to a shameful culture of excess.  Yet that same greed continues today.
“A bonus that dwarfs an average American worker’s entire annual salary is excessive.  Doing so in a way that also threatens our economy is dangerous.  It’s wrong. It’s a slap in the face.
“Main Street jobless rates and Wall Street bonuses should not rise at the same time.  Seniors who rely on Social Security should not be shortchanged while the traders who threaten our economic security are rewarded.  Taxpayer money that was supposed to keep our economic pillars from collapsing should not go directly from your savings to a brash broker’s pocket.
“If the executives who designed these windfalls came out of their corner offices, they would see how badly Americans are suffering.  They would see how offensive these paydays are.  They would see how desperately hardworking families are struggling to hold on to their jobs, to their homes and to their health care.  And they would be ashamed.
“We must put an end to the recklessness that got us into this mess.  We cannot accept more of the same.
“Last week, the Treasury Department announced it will reasonably limit the excessive paychecks of the top executives at companies in which you and I and every American now own an equity stake.  I support that plan.
“Then, the Federal Reserve announced it will rein in banks that reward the riskiest practices – gambles that endanger all of us.  I support that, too.
“And in the near future, we will reform our financial industry through legislation commonly referred to as regulatory reform.  We will make sure banks are compensating their employees in a prudent way.  That means firms won’t be able to throw cash at a trader who closes a big, risky deal, one that puts the whole bank at risk, and that threatens taxpayers and the greater financial system as well.
“The Treasury, the Fed and the Congress will all play their parts.  Regulation has its role.  But I’ve never believed that government is the answer to everything. And that’s why Wall Street has to take responsibility for its own actions, too.
“This industry, more than any other, knows the importance of sending signals.  The stock market hinges on hints, the trading floors run on rumors, and these public companies live and die by the confidence they instill, the impressions they inspire and the messages they send.
“So these firms – whether or not they owe the government for their survival – should be careful about what their actions say about them.  Because the American people are listening closely.  
“Greed got us into this mess; it will not get us out.  If we are going to continue to recover and ultimately prosper, this perverse culture and destructive behavior cannot continue.  How many more times must we learn this same lesson?”