15 Dec Financial Reform at America’s Doorstep
FINANCIAL REFORM FINALLY AT AMERICA’S DOORSTEP
Real reform of the Industry that led to the collapse of our Economy is perhaps right around the corner. This week the U.S. House of Representatives narrowly approved the most sweeping overhaul of financial regulations since the Great Depression, in hopes of preventing a similar crisis.
In order for this reform to become reality, the bill would still have to go through the Senate and be signed into law by the President. But this is by far the closest Americans have been to getting real financial reform from the conditions that caused the Recession.
Here are some highlights of the bill that passed the House:
1. Americans no longer would be responsible for bailouts, other large financial firms would. This would be done by breaking up large financial firms if their size poses a major risk to the economy, as well as seizing and dismantling such firms if they’re about to go bankrupt. A new $150-billion fund, paid for by the financial industry, would cover the costs of any government takeovers.
2. The bill also would create a powerful new agency to protect consumers in the financial marketplace. It would outlaw many predatory and abusive mortgage practices and for the first time regulate hedge funds and private pools of capital.
3. Company shareholders would get a nonbinding vote on executive compensation. This would do a lot to prevent CEOs from getting giant bonuses when they actually lose the company money. (Which happened on multiple occasions leading up the Financial Meltdown).
4. The bill would make other major changes to federal oversight of the financial system, including imposing new requirements on credit rating agencies and the trading of complex securities known as derivatives.
5. The Bill would create a new Consumer Financial Protection Agency. The new agency would have the power to write rules for a variety of financial activities involving loans or credit, to monitor large banks for compliance and to ban products and business practices it deemed unfair, deceptive or abusive.The agency would take over from the Federal Reserve the ability to write consumer protection rules and from banking regulators the authority to monitor financial firms for compliance with those rules.It’s one of several ways the Fed would lose power under the legislation. Lawmakers have sharply criticized the central bank’s performance leading up to the crisis. Under the bill, the Fed’s emergency lending authority would be decreased and it would face congressional audits of more of its activities. But the Fed would gain a new role in regulating large firms deemed to be a potential risk to the economy.Consumer and public interest groups support creating the agency, citing the failure of the Fed and other regulators to rein in subprime mortgages.
The President of Consumers Union, Jim Guest, hit the nail on the head: “We need an aggressive watchdog in Washington that looks out for the best interests of consumers. This agency would crack down on lenders and banks that abuse their customers and it would provide information consumers need to make informed financial decisions.”
Large financial firms have fought aggressively against creating the agency; which doesn’t come as a surprise since it would no longer allow them to receive taxpayer bailouts. Any bailouts would be on their own dime and the dime of their fellow Giant Financial Firms.
Of course politics will play into whether or not the bill gets signed into law. House Democrats said the new regulations would reverse years of lax oversight under President Bush that let risky Wall Street behavior shatter the economy.
Perhaps the most damning blow to the Republican Party is that not a single Republican Congressman or Congresswoman voted in favor of the financial reform bill. There are also the giant financial lobbying firms that are trying to kill the bill before it can be passed through the Senate. The Senate bill differs in some key areas, and action there lags behind the House, making legislation unlikely to reach the president before early next year. President Obama urged Congress to “act as quickly as possible.” In the meantime, the House has sent a clear message that can be summed up nicely by Nancy Pelosi, “We are sending a clear message to Wall Street: The party is over. Never again will reckless behavior on the part of a few threaten fiscal stability of our people.”
Mark “Marky Mark” Grimaldi
The Leslie Marshall Show
“The Only True Democracy In Talk Radio – Of, For and By You The People.”