Vice President Joe Biden and U.S. Treasury Secretary Timothy Geithner urged students at the University of Wisconsin-Milwaukee to support new and increased regulations on the financial services industry, including the stock market.
"I have a strong plea for my colleagues – to get on with the business of attending to the business of the American people," Biden said at the White House's Middle Class Task Force Town Hall Meeting today at UWM. "We all agree that things have gotten a bit out of control and that the status quo is unacceptable. It's time to update the rules for the 21st century."
Republicans in the U.S. Senate are now filibustering President Barack Obama's financial reform plans.
Biden said new regulations on Wall Street are the most important piece of a financial industry overhaul. He said the new rules will: ensure that consumers are protected against unfair and predatory practices; make the derivatives market more transparent; require banks to hold more capital to cover their loans; and break up large banks if they fail.
"Never again should the government bail out a bank or watch the economy implode," Biden said. "This is a big deal, at a time that matters that we get it right, that we get the shady credit default swaps under control and put things on the level again. What people are upset about is that they don't think things are on the level."
Geithner said the new regulations will not stifle Wall Street or the American economy, but will improve financial performance and the financial well-being of the nation's middle class.
"Financial reform is about protecting the security of all Americans," Geithner said. "It is about protecting customers from fraud and abuse. It is about providing a stable source of affordable credit and capital to businesses. It is about protecting the American taxpayer from having to bear the burden of mistakes on Wall Street. It is about making sure that when banks make mistakes, they take responsibility for those mistakes."
Earlier today, officials from Goldman Sachs Group Inc. tried to defend themselves in hearings called by Senate Democrats. The Securities and Exchange Commission has filed a civil fraud complaint against Goldman and one executive, Fabrice Tourre, claiming they misled investors on collateralized debt obligations.
Sen. Carl Levin (D-Mich.), chairman of the Senate's Permanent Subcommittee on Investigations, said the firm's conduct of betting against mortgage-related securities that it sold to clients "brings into question the whole function" of Wall Street.
Levin focused on one internal e-mail in which a Goldman executive referred to a "sh-tty deal."
"How much of that sh-tty deal did you sell to your clients?" Levin asked Daniel Sparks, former head of Goldman Sachs' Mortgage Department. "You knew it was a sh-tty deal, and you didn't tell your clients … Does that bother you at all?"
If the proposed financial regulations are passed, they will help rebuild the American economy, similar to new regulations passed in the wake of the Great Depression, Biden said.
"When you strip it all away … what you see is that this has gone on before," Biden said. "What matters is that your grandparents' generation set up rules that helped create the most powerful economy the world has ever seen. What we have to do is do it again. The underlying principles are the same."
In the same breath, Biden said government will not rebuild the American economy.
"The free market is a really cool thing - there's nothing like it," Biden said. "They say that Wall Street reform will stifle innovation. Since when does telling the truth stifle innovation?"
Eric Decker is a reporter for BizTimes Milwaukee who covers the financial services industry.