Heinrich: No more 'too big to fail'

U.S. House Rep. Martin Heinrich hosted a “telephone town hall” discussion June 30, where he discussed the benefits of the Wall Street Reform and Consumer Protection Act to more than 3,000 callers.

Heinrich, the First district’s Democratic representative, said the bill, which passed through the House by a 237-192 vote, will help create and keep jobs, and in turn help New Mexico.

“(The bill) means that a small business owner in the district, in a place like Moriarty or Belen, will still have access to the capital they need to keep their small business running,” Heinrich said. “That’s going to mean, in our neighborhoods, fewer boarded-up houses.”

Heinrich encouraged constituents with mortgage or credit card problems, in situations where the consumer has been taken advantage of, to contact his office for information and help during the town hall.

The bill is designed to anticipate future economic disasters and prevent the circumstances that led to the market downturn in 2008 and 8 million job losses, Heinrich said. It will discourage companies from becoming “too big to fail,” create an organization that will analyze risks to the economy and grant the Federal Deposit Insurance Corporation the power to liquidate failing companies and sell the assets, he said.

“It ends the situation where you have these financial institutions, these Wall Street banks, so intertwined that if one goes down it takes otherwise healthy institutions down with it,” Heinrich said. “It’s much harder for an institution to get into that risky category in the first place — where it couldn’t fail.”

UNM Professor Erik Gerding, whose teaching focus is the subprime mortgage crisis, has a less optimistic take on the legislation.
“It addresses the ‘too big to fail’ problem only weakly and obliquely,” Gerding said. “Even a good statute and good regulations can be undermined if other countries have loose regulations.”

In the House vote, only three Republicans voted for the bill. Republican lawmakers say the bill grants too much power to the government and stifles the free market.

“If this bill becomes law, bailouts and ‘too big to fail’ will become institutionalized and continue to block healthy competition and growth in the private sector,” said Republican Rep. Tom Price of Georgia during the town hall.

The bill is expected to appear before the Senate for a vote this week.

Gerding said the bill’s effect on New Mexico would be minimal compared to other states and that the biggest impact on the University community would be the creation of regulations on credit cards, mortgages and student loans designed to protect consumers.

He said the regulations will still miss the mark.
“With private student loan companies, on the one side, you have a concentrated group of lenders that are sophisticated and have a big interest in the regulatory outcome,” Gerding said. “On the other hand, you have a diffuse group of students who might benefit. Who do you think will exercise more influence over the regulations?”