We recently asked you for questions for the White House about the financial crisis. Your response was impressive.
Among the 150-plus questions, we were able to narrow it down to nine of the most representative ones, which we then sent over to the White House. Here are the administration's answers to your questions.
1. Crooked Wall Street bankers should have gone to jail. Why didn't they?
First, remember that decisions on law enforcement are made independently by the Justice Department. But here are the facts:
The past five years have been one of the most prolific periods for financial prosecutions brought by the Justice Department in recent history, and the SEC, CFPB and state regulators have taken significant steps in holding Wall Street firms accountable. On top of that, the new protections that Wall Street Reform puts in place are designed to prevent the kinds of abuses that contributed to the financial crisis from happening again.
To highlight a couple of the most notable efforts to bring those who broke the law to justice have included the Justice Department charged more than 37,000 white collar defendants from 2009 to 2012 -- of which more than half were financial fraud cases, including 3,520 mortgage fraud defendants. The average sentence length of this type of fraud case has nearly doubled in the last decade. The United States and 49 States' Attorneys General completed the largest mortgage settlement in history, helping 640,000 borrowers get more than $50 billion in gross relief.
Meanwhile, as the Attorney General has indicated, no one who has inflicted damage upon our financial markets should think they are out of the woods just because of the passage of time.
2. Banks are bigger than ever. Too big to fail has gotten much worse. How do you guarantee that taxpayers won't pick up the tab the next time a large bank gets into a position to wreak havoc on the economy again?
Over the past five years, we've put an end to "too big to fail", and we've made sure taxpayers are no longer on the hook for Wall Street's reckless behavior. The landmark Wall Street Reform law did two things. First, it made sure our banks are less risky and better capitalized, which means they are less likely to fail. Second, it created new authorities to make sure regulators have the tools they need to wind down banks in an orderly manner in the event they do fail. This means no more bailouts, and it means no more "too big to fail."
Today, our banks hold more and better-quality capital than they did before the crisis. In fact, new rules will require the largest banks to hold even more capital. That will make sure they have an adequate cushion against losses, and it will reduce the chance any bank will fail. Reforms that are under way also prohibit banks that take deposits from consumers from engaging in risky hedge fund type trading unrelated to serving their customers' needs. This will make sure that middle class families aren't left holding the bag for risk-taking on Wall Street.
And if a big bank fails, Wall Street Reform ensures taxpayers aren't on the hook. The largest bank holding companies and nonbank financial companies designated for Federal Reserve supervision and enhanced prudential standards also must have "living wills" to provide a roadmap for resolving these firms through bankruptcy. In addition, new tools are now available to orderly and responsibly resolve financial institutions that pose a systemic risk to the financial stability of the United States. If such plans are not satisfactory to the regulators, they'll have the authority to impose stronger capital and liquidity requirements on those firms, or order them to divest assets and business operations to ensure the safety and stability of the financial system. Finally, Wall Street Reform makes it clear that when a firm fails, its shareholders, creditors, and the financial industry will bear the costs -- not taxpayers.