Alexi Giannoulias | Democrat for U.S. Senate

Financial deregulation allowed for the creation of giant financial supermarkets that could own investment banks, commercial banks and insurance firms -- a practice banned since the Great Depression but overturned ten years ago. This cleared the way for the creation of companies that were too big and intertwined to fail. When they engaged in risky behavior and lost billions of dollars, the U.S. government had no choice but to step in and keep the financial system afloat.

Entwined in this web was the proliferation of risky mortgages issued by unregulated non-bank lenders. These companies make a quarter of all mortgages, but account for nearly half of all subprime loans. Once these loans were made, unregulated mortgage lenders quickly bundled them with similar loans and sold them as mortgage-backed securities. The collapse of the housing market turned these securities into worthless “toxic assets” and added significantly to the downfall of the large financial institutions that had bought the securities and spurred the demand for even more risky instruments.

Instead of reigning in the size and scope of financial firms, the bailouts have led to even larger institutions. Since the financial crisis, the country’s four largest banks have only gotten larger and now account for nearly 40 percent of total banking deposits and issue half of the country’s mortgages. If one were to fail again in the future, the resulting economic storm would be even more severe than the last.

The Plan: Put the interests of taxpayers over those of the large financial institutions

Alexi’s plan aims to prevent a future crisis by providing more oversight of “too big to fail” institutions, opening up the secretive derivatives market, and ending the cycle of consumer debt caused by hidden costs in financial service products.

• Proactively address the threat of “too big to fail” institutions rather than waiting for the next crisis to strike. Current proposals in Washington DC are music to the ears of Wall Street CEOs: keep doing what you’re doing, and if we are on the brink of another meltdown the government will step in and deal with the problem. But this strategy does little to prevent a crisis from happening in the first place. Alexi believes that we need a proactive plan to protect consumers and the American economy from another financial catastrophe caused by Wall Street’s thirst for greater profit. To achieve this, he would call for enhanced supervision of the most fragile institutions, for greater capital requirements at financial firms, for immediate contributions by large financial institutions to an “emergency fund” that could be tapped for any future bailout, and for a “living will” that would provide a plan to wind down any institution that is close to failure.

• Regulate the non-bank mortgage lending industry. Alexi supports applying the same oversight rules that govern banks to non-bank lending institutions. These institutions, which are often registered as subsidiaries of regulated institutions so that they can evade the government’s review, account for a disproportionate number of subprime loans and deserve the same scrutiny as other lending firms.

• Reign in the unregulated multitrillion-dollar derivatives market that helped create the financial crisis. Derivatives are supposed to help investors and businesses manage risk, but after they were deregulated in 2000 they became tools for vast speculation that are largely traded with no public scrutiny or transparency. This creates and amplifies risk instead of reducing it. Alexi supports the creation of an exchange on which all over-the-counter derivative transactions would be required to take place.

• Empower consumers to protect against deceptive banking and lending practices. The large financial institutions continue to grow rich by charging fees on just about everything, and consumers frequently have no idea about these costs that are hidden in fine print. Alexi supports the creation of a Consumer Financial Protection Agency that protects consumers from home loans, credit card fees, payday loans and other forms of consumer finance that hide costs and push more Americans into an unending cycle of debt.

The Record: A fighter for consumer rights

As Illinois Treasurer, Alexi has fought the deceptive practices of corporations and financial institutions. He kept predatory credit card companies off college campuses and stood up with workers of Hartmarx when Wells Fargo threatened to liquidate 10,000 good paying jobs. He also capped the fees that for-profit companies can charge to find unclaimed property, a process that people can typically do themselves for free. In October, he proposed legislation that would regulate debt settlement companies operating in Illinois for the first time. Debt settlers advertise widely on radio, television and the internet, promising to help distressed borrowers avoid bankruptcy by negotiating to pay off their debt for pennies on the dollar. Very few borrowers see this result, and most wind up further in debt and lousy credit ratings.

In the U.S. Senate he will continue to tilt the balance of power back to the consumer and increase oversight of the financial institutions whose reckless actions caused the economic crisis that now affects us all.

Part I: The Giannoulias Plan To Build The New American Economy

Part I of Alexi's Future Works plan focuses on jumpstarting the economic engine again. Alexi proposed an extension of the successful $8,000 first-time homebuyer tax credit, a one-year payroll tax holiday for middle income workers, and a job creation payroll tax credit. He would offset the costs of these job-creating tax incentives by eliminating nearly $200 billion in tax loopholes used by corporations that ship American jobs overseas.

Read more about Part I of Alexi's plan by clicking here.

Part II:  Reforming TARP To Support Main Street, Not Wall Street

The second part of Alexi's Future Works plan focuses on freeing up credit in our communities so that small businesses can create jobs for our families. He wants to make credit available to small businesses by rerouting bailout money from banks to the Small Business Administration. His plan would entice local banks and credit unions to boost sorely needed lending to small businesses by offering 90 and 100 percent loan guarantees, but it would come with far more rigid standards than the Troubled Asset Relief Program (TARP) funds that originally went to Wall Street firms.

Read more about Part II of Alexi's plan by clicking here.

Part IV: Restoring Fiscal Sanity to the Federal Budget

Part IV of Alexi's plan focuses on fiscal discipline and long-term economic planning. This part of his plan includes mechanisms to erase annual budget deficits and begin paying down debt through pay-as-you-go budgeting, targeting tax cuts, cutting wasteful spending, and holding tax cheats accountable.

Read more about Part IV of Alexi's plan by clicking here.

Part V: End Unfair Trade Agreements and Fight China's Anticompetitive Practices

Part V of the Alexi's Future Works plan focuses on ending unfair trade agreements and fighting China's anticompetitive practices. Alexi wants to renegotiate NAFTA and other trade pacts, ensuring that future agreements learn from out past mistakes. He also wants to close loopholes that give tax breaks to companies that ship overseas, raising nearly $200 billion by doing so.

Read more about Part V of Alexi's plan by clicking here.

Part VI: Invest in Innovation to Keep America Competitive

Part VI of Alexi’s plan focuses on investing in innovation to help America grow. Alexi will invest in an army of well-trained STEM teachers to provide a better quality of education for our youth. He will create a $100 million federal Innovation Partnership Investment Fund to match private donations for research at American universities. He also plans also upgrade skills through apprenticeship programs by linking students with on-the-job training.

Read more about Part VI of Alexi's plan by clicking here.