Banking Greed and Regulatory Failures Threaten Financial Industry Stability, Says Pioneer Law Firm

February 23, 2015 (PRLEAP.COM) Business News
Westminster, CO – Feb. 23, 2015 – Pioneer Law ( a Colorado firm providing bankruptcy, FDCPA, real estate, and business law services warns that big bank power and regulatory shortcomings are risking another financial crisis in the United States. The return of a shadow banking system in the U.S. that contributed to the financial crisis of 2009 indicates that current legislation and oversight isn't enough to protect the financial system. The term "shadow banking" refers to companies or markets providing services similar to traditional commercial banks, however outside the supervision of the regulated banking system. The nature of big banks is to seek big profit, and the system that oversees large banks is at the heart of the financial crisis still impacting America and the globe.

Banks suffer from the schism of being a for-profit corporation while also serving as a financial resource and steward for their customers. The fallout from the financial crisis has shown banks' drive for profits over the last decade was connected to mortgage fraud, record home foreclosures, government bailout of the banks, stock market drops, and a global recession. The cause of the financial crisis wasn't one bank or group, but the entire system of monetary policy and financial regulation in the United States which allows a culture of inconsistent management and fraud to achieve profits.

Initially in 2006 it was financial regulations encouraging homeownership, home value growth, and banking greed that led to the U.S. housing bubble bursting. Then a combination of deregulation, financial innovation, and collective drive for larger returns created a shadow banking system that contributed to the financial crisis of 2009. The private investments or bonds kept off a bank's records grew dramatically, not subject to regulator oversight, and competition drove banks to riskier profits outside their guidelines. Perpetually regulators would set rules and banks would find creative ways around the rules, in a cat-and-mouse game until the shadow banking activity reached a peak of $2 trillion in 2009.

The U.S. Congress responded by passing the Dodd–Frank Wall Street Reform and Consumer Protection Act (H.R.4173) to repair the system. While politicians have voiced equal praise and criticism of Dodd-Frank, conservative lawmakers in the House and Senate recently proposed and passed new legislation that would rollback provisions of the Reform Act. "The Dodd-Frank Wall Street Reform and Consumer Protection Act is helping prevent the kinds of excessive financial risk-taking that caused the worst recession in more than 70 years, left millions of Americans unemployed, and resulted in trillions of dollars in lost wealth," the White House's official statement of policy said, charging the House bill would raise risks while "benefiting Wall Street and other narrow special interests." Other critics argue that such regulations perpetuate the financial industry's schism between greed and service, that banks need less regulation so they're forced to be more efficient and less volatile. The issue of saving and investing wisely could be solved by giving the banks more freedom with simple yet clearly-enforced federal rules.

Even with the current financial industry regulations in place, the International Monetary Fund (IMF) has warned that the U.S. shadow banking system is returning and is the largest potential threat to our financial system. In a speech, the IMF's deputy chief said, "The key risk has shifted to shadow banking … non-financial corporations have raised $1.3 trillion through shadow banking in the U.S. alone."

As financial companies are posting record-setting profits and receiving record-setting fines for legal violations, their size and the damage they cause is also increasingly in question. Companies that were considered "too big to fail" were bailed-out by the government at a price tag of $700 billion. Most have repaid the bailout loans; however the continued growth, fines, and issues of America's largest banks are raising concern and scrutiny to break-up the large banks. Smaller banks with more niche focuses would increase accountability, improve service, and spur innovation.

"The banking and financial system in America has been a broken machine for decades, but has been obscured from public view and outrage. Even with banking penalties totaling billions of dollars, banks are incredibly profitable with more money than they can loan, so they can simply set aside more money for government fines and continue with their broken processes. Even as legislators and regulators put new safeguards in place, the banking system rewards profit above service and stability," says John Dougherty, Founding Attorney at Pioneer. "Executives get bonuses for profit on investment, not the number of home foreclosures avoided or families helped. It must be the banks that enforce financial stability and true customer service, not the regulators that oversee them."

About Pioneer Law
Pioneer Law is a legal firm specializing in Bankruptcy, Business Litigation, FDCPA, and Real Estate law. For those paralyzed by debt, disputing with a business, troubled by a collector, or involved in the sale of real estate, the specialists at Pioneer Law are prepared to advise, represent, and give peace of mind. For more information visit

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