Below are excerpts from AFL-CIO President Richard L. Trumka's recent testimony before the House Financial Services Committee:

Our members were not invited to Wall Street's party but we have paid for it with devastated pension funds, lost jobs, and public bailouts of private sector losses. Our goal is a financial system that is transparent, accountable and stable, that is the servant of the real economy rather than its master.

The AFL-CIO is a member of the Americans for Financial Reform coalition. We share the Coalition's four core goals: create a consumer financial protection agency; reregulate the shadow financial markets -- derivatives, hedge funds and private equity; create a strong fully public systemic risk regulator; and address the housing crisis.

We are deeply concerned that the committee's work thus far on the fundamental issues of regulating shadow financial markets and institutions will allow the very practices that led to the financial crisis to continue. The loopholes in the derivatives bill and the failure to require any public disclosures by hedge funds and private equity funds fundamentally will leave the shadow markets in the shadows.

With respect to systemic risk regulation, the Americans for Financial Reform and the AFL-CIO strongly support the concepts in the Treasury Department White Paper that a systemic risk regulator must have the power to set capital requirements for all financial institutions that are large enough or connected enough to affect the stability of the financial system. We also strongly support the Treasury's proposal to give the systemic risk regulator the power to place such an institution in a resolution process run by the FDIC. However, these powers must be given to a fully public body, and one that is able to benefit from the information and perspective of the routine regulators of the financial system.

A new agency, with a board made up of a mixture of the heads of the routine regulators and direct Presidential appointees, would be the best structure. However, if the Federal Reserve were made a fully public body, it would be an acceptable alternative.

But we cannot support [giving] dramatic new powers to the Federal Reserve without reforming its governance so that the banks themselves are removed from the governance of the Federal Reserve System. Even more alarmingly, the discussion draft would appear to give power to the Federal Reserve to preempt a wide range of rules regulating the capital markets -- power that could be used to gut investor and consumer protections.

If this committee wishes to give more power to the Federal Reserve, it must make clear this power is only to strengthen safety and soundness regulation and it must simultaneously reform the Federal Reserve's governance. Reform cannot be put off another day. . . .

Instead of repeating and deepening the mistakes associated with the bank bailout, Congress should be looking to create transparent, fully publicly accountable mechanisms for regulating systemic risk and for acting to protect our economy in any future financial crises.

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