Monday, December 14, 2009
House Democrats narrowly passed a Wall Street reform plan on Friday, sending to the Senate a mixed bag of changes that was both praised and criticized by consumer advocates. Detractors of the financial industry were happy with the idea of creating a Consumer Financial Protection Agency (CFPA) that would police lenders who issue mortgages and credit cards. The House bill would also establish new rules for the trading of derivatives and make the credit-rating industry more transparent. Banks labeled “too big to fail” would be required to contribute to a government fund intended to break up behemoth institutions if they go bankrupt, and the Federal Reserve would be subject to audits by the Government Accountability Office.
But there was no shortage of disappointment in the reform proposal. Public Citizen declared that the legislation did “very little to address industry structure” and allows the largest banks to remain intact. The Center for Responsible Lending feared the new CFPA would get in the way of state regulators in going after Wall Street. Others complained about provisions allowing shareholders to hold non-binding votes on executive compensation and exempting about half of all publicly-traded companies from having to submit to audits of their internal operations.
The bill does not address fundamental changes, such as reinstating the Glass-Steagall Act that separated commercial banks that hold the deposits of regular citizens, from investment banks that engage in risky deals. The act was repealed in 1999.
-Noel Brinkerhoff
Summary of H.R. 4173 (Democracy in Action) (pdf)
House Passes Wall Street Reform Bill With Zero GOP Votes (by Shahien Nasiripour and Jeff Muskus, Huffington Post)
House Passes Rules for Wall Street Over Opposition (by Alison Vekshin, Bloomberg News)
10-Year Anniversary of the Bill That Led to the Current Economic Crisis (by Noel Brinkerhoff and David Wallechinsky, AllGov)
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