Congress Won't Pass Financial Reform, So Let's Do It Ourselves

A month after his confirmation as America's top consumer watchdog and two weeks into the five week congressional recess, Richard Cordray sat down on the TV show Morning Joe. That can only mean one thing: Congress is gearing up for another battle of financial reform sound-bites. In the meantime, your dollars keep lining the pockets of Wall Street tycoons and in true D.C. fashion, a nice slice of your cash will be handed over to lobbyists who will be advocating hard for laws that put your financial future in jeopardy.

So before this becomes a tornado of spin, there are three absolutes that must not be sold to the highest bidder.

Credit Default Swaps: Companies like AIG sold “insurance” policies to home mortgage companies, which protected them against foreclosures and short sells. In normal times, that might be thought of as savvy, but during a mass meltdown it acted as a disincentive to work with homeowners. Simply put, mortgage holders made more money if the family lost its home.

Some five years after the crash, this kind of derivative is still widely unregulated and still incentivizing home loss. The federal government is tightening down but Congress must do more, including truth-in-lending disclosure (if your mortgage holder is betting against you, you have the right to know about it), and a cap on the value of the policy (mortgage companies should only be able to recoup current market value).

Pride of Ownership: Most large companies are operated by a CEO and a board who are only beholden to each other and stock holders. The CEO selects board members, the board selects the CEO, and all are compensated with a nice bag full of stock options. In the end, the only thing that matters is stock price. Not product quality. Not the employees. Not corporate citizenship.

This kind of bubble chase leads to unethical, secret “cooking of the books.” Congress can address it by making CEO and board compensation public and giving stockholders a vote on such packages, giving employees a seat on the board, and encouraging employee-owned companies.

Too Innovative to Ignore: No financial reform would be complete without a serious look at how fledgling companies access capital. While we rebuild, we must focus on American entrepreneurship. Americans should never again be held hostage to huge conglomerates, which may be working against the public interest and even letting their bad business practices threaten our entire way of life.

The fastest way to attract lenders to startups is to ensure that government at every level is adhering to a preference for local contractors, veterans, minority-owned businesses, and women-owned businesses. For example, our high speed rail should be built by American companies from start to finish. Our roads should be maintained by our neighbors and our school lunches should be made up of locally grown products.

In three weeks, we will once again be besieged by bickering and finger-pointing. Ultimately, if the history of this Congress is any indication of its future, nothing will get resolved before the next recess. The solutions will come from average working Americans who believe that their home is their castle and that hard work for an honest wage is a contract. No Congress, not this one or the 10 that come after it, will be able to stop America from righting the wrongs uncovered in this recession once we as a nation decide to unite around our right to be treated fairly.