In March, the largest recipient by far of taxpayer bailout cash, AIG, announced it had rewarded its failed executives with bonuses totaling $165 million dollars. President Obama and leading members of Congress have called for legislation to get that money back. Companies should not be rewarded for failure, especially with taxpayer dollars.

Listen to Ed Mierzwinski on American Public Media's "Marketplace" talking about who should regulate the banking system.

How Did We Get Here? A Lack of Marketplace Protections
Over the least few years, despite urgent warnings, America’s banks and mortgage companies made predatory home loans to millions of consumers. The loans were made in an environment without marketplace protections against either predatory mortgages or unsafe investments. As the cost of housing went up, the firms made even riskier loans. Then they sold the loans and the risk into the financial markets in the form of securities that were sold off again and again as murky, unregulated “collateralized debt obligations” and “credit default swaps” (basically, bets) that the Wall Street titans and the regulators themselves now admit they didn’t even understand.

Then, the housing bubble burst and the financial markets collapsed. Homeowners with loan obligations that they could not afford were left without a way to avoid foreclosure. Entire neighborhoods and communities faced disaster as the numbers of boarded-up homes increased. The ripple effect hit the world economy. The value of consumer retirement portfolios has diminished by well over one-third or more and layoffs continue.

Congress and the administration’s unprecedented $700 billion Wall Street bailout of the financial firms that had caused the mess did nothing to help desperate homeowners, little to insulate taxpayers from abuse of the bailout and nothing to cauterize the wounds caused by the predatory and unregulated practices of the financial industry. Worse, instead of guaranteeing that the money would be used to make loans, the government allowed the financial companies that caused the mess to continue spending the taxpayer cash on increased dividends, lavish executive compensation and acquisitions and mergers, not on loans and investments in America’s homeowners and neighborhoods. Americans do not like the bailout and they have not seen any benefits of spending all that money.

U.S. PIRG’s Platform To Secure America’s Financial Future
Now that we know that a few investment firms can undermine the larger economy, we must take steps to protect taxpayers and consumers. We need to rein in the excesses of Wall Street. No more hidden accounting practices or demanding that we invest our retirement savings blindly.  We need to protect consumers and our economic future with new rules to put a check on irresponsible banking practices and we need to make sure those rules are enforced. We need independent enforcement. No more cozy relationships between regulators and the regulated.

We need to fix the bailout and we need to guarantee that it won’t happen again. We need a financial system that protects taxpayers, homeowners and tenants, depositors and small investors. We need financial regulatory reform that Secures America’s Financial Future.

Fix the bailout:
(1) Require banks and other institutions to account for how they spent taxpayer money they received in the bailout. 

(2) Use a portion of the remaining bailout funds to help people who are losing their home to foreclosure as called for by President Obama and Rep. Barney Frank (Mass.).

(3) Place appropriate restrictions on how the remainder of the funds can be spent.  

Secure our financial future:
(1) Create a Consumer Credit Safety Commission with authority to rank and regulate the safety and the suitability of financial products and to “recall” or even “ban” unsafe or predatory products.

(2) Eliminate off book transactions and require greater oversight of activities of financial institutions and regulators, including largely unregulated hedge funds and buyout firms whose activities pose systemic risks.

(3) Stop “regulator shopping” and make regulators accountable by eliminating incentives in the current system for financial institutions to trade off regulators for better deals.

(4) Keep state attorneys general and other state financial regulators on the financial crime beat by opposing industry efforts to eliminate their authority and consolidating it all in the hands of the lax federal regulators who were asleep at the switch.

(5) Implement all the recommendations of the Special Report on Regulatory Reform of the bi-partisan Congressional Oversight Panel chaired by Professor Elizabeth Warren.