A special editorial by Roberto Berrios that discusses the American financial system and the urging of more financial regulations by President Barack Obama.

In today's partisan climate, there is one thing that most people can agree on: the American financial system should encourage competition and at the very least, make it a leveled playing field. In order to achieve that, some basic financial regulations are necessary. These principles have held to true to one degree or another throughout our history.

Fast forward to 2008 and many names come to mind about what to call our financial system but unfortunately, competitive is hardly one of them. The six largest banks in American today are Bank of America, Citigroup, JP Morgan Chase, Wells Fargo, Goldman Sachs and Morgan Stanley. A New York Times piece is incredibly telling of what these banks have become: in 1995, the six largest banks had assets that totaled 17 percent of the nation's GDP; today…they hold close to 65 percent of the nation's GDP. The American financial system had thousands, if not millions of banks in total. To think that 6 of them hold 2/3 of our GDP is astonishing. Once again, competitive is hardly the word that comes to mind.

There are fundamental problems with our system operating in this manner. The most obvious is the fact that these mega banks are not required by law to carry enough capital in reserve just in case they run into a problem. In 2008, one could be very generous when describing the financial crisis by saying that banks ran into a problem. One of the worst recessions in decades saw the American people caught in a bind. On the one hand, these banks could be permitted to fail and along with them could go obscene amounts of hard earned savings, benefits and investments. On the other hand, the federal government could come to the rescue by investing unprecedented amounts of money to help these banks cover their capital. As they say, the rest is history: the federal government spent hundreds of billions of dollars to prevent a catastrophic world collapse of the financial markets.

The United States government has a responsibility to make sure that this never happens again not only to avoid the political fight but to avoid the economic hardship that took place as a result. There are three simple solutions that sadly may or may not make it into the financial regulations being considered in the United States Senate.

First and foremost, these big banks need to be broken up. The Banking Act of 1933, better known as the Glass-Steagall Act, addressed the issue of banks being too big and not covering their capital. It created the FDIC and stipulated that banks needed to choose between being investment banks and commercial banks because by being both, they had proven they could not responsibly manage their capital. For 66 years, this law prevented a recession as severe as the Great Depression. In 1999, it was repealed. Not surprisingly less than 10 years later we had a collapse that is topped only by the Depression of the 30s. Plain and simple: banks need to be given a year to decide which type of bank they will be and must then be broken up into separate smaller entities.

Secondly, after these banks are broken up, they must be required to carry enough capital. The fact is that there is considerably more wealth in 2010 than there was in 1933. Accordingly, banks should be required to carry more capital in the event that the market slides into recession and investments temporarily level off or decline.

The final measure that should be taken is perhaps the one that would impact ordinary Americans most. Derivatives are a remarkably difficult concept to understand. In very basic terms, a derivative is a financial instrument that has a value determined by the future price of something else. Essentially, you are betting on what something is going to cost several months down the road. Banks decided to try this and to say that they were wrong is quite an understatement. What makes it worse is that this risky business is largely unregulated, partially because it is so complex to understand. Some of these banks are now accused of betting on things that they knew the outcome of. In the process, banks padded their bottom lines with the assumption that they would make that money. When they didn't, they found out they needed lots of money just to survive. The solution to these is a Consumer Financial Protection Agency. It is crucial not only that this agency is created to protect the American taxpayers, but is also crucial that it be made an independent agency so that is cannot be abolished and so that it can act independently in the interests of only the American people and no one else.

It appears that these common sense financial regulations will be subject to the same political games that health care reform went through. We at UCF strongly urge our lawmakers and President Obama to look out for the interests of the American people over those of the special interests who feel no remorse for the financial crisis they created. If not for any other reason, we don’t want to bail out the banks ever again.