Speaker Pelosi praises finance overhaul. House Speaker Nancy Pelosi says a sweeping overhaul of financial regulations will bring a new level of transparency and accountability to Wall Street and big banks.
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U.S. House passes stricter Wall Street Regulations.
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U.S. House approves Financial Reform bill
A little over a year after Congress bailed out the financial system, the House on Friday passed a sweeping overhaul of the nation’s financial architecture and the rules that govern it, seeking to prevent a repeat of last year’s meltdown.
Friday’s 223-to-202 vote was a major victory for the Obama administration, which has made Wall Street reform a policy and political imperative, second only to health care on its agenda. But like so much of the White House’s other legislative agenda, this too, was a partisan win, as not a single Republican voted for the bill.
House Minority Whip Eric Cantor (R-Va.) aggressively made the case for Republicans to oppose the bill, and in the end all of them did. In addition, 27 Democrats voted no. ]
The massive plan touches nearly every corner of the financial universe, from the now-opaque and largely unregulated derivatives market to consumer products like credit cards to credit rating agencies to executive compensation. It also creates a new consumer financial watchdog agency.
“The crisis from which we are still recovering was born not only of failure on Wall Street, but also in Washington,” President Barack Obama said in a statement. “We have a responsibility to learn from it, and to put in place reforms that will promote sound investment, encourage real competition and innovation, and prevent such a crisis from ever happening again.”
The legislation sends a clear message to Wall Street that “the party is over. Never again will the reckless behavior [of] a few threaten the fiscal stability of our people,” said House Speaker Nancy Pelosi (D-Calif.) at a news conference after the final vote. The legislation, she continued, would “inject transparency and accountability into our financial system.”
The action now moves to the Senate, where the final outlines of the financial reform package remain murky. Senate Banking Chairman Chris Dodd (D-Conn.) introduced draft bill Nov. 10, but has since gone back to the drawing board, with key members on his committee now working in two-person bipartisan groups to tackle the thorniest issues.
Obama and congressional Democrats have put considerable emphasis on the so-called Consumer Financial Protection Agency. The provision was the object of some of the most intense lobbying of the entire package up until the very end. Hated by the financial industry and big business, the CFPA became the cause célèbre of liberals and consumer advocates.
Rep. Walt Minnick, a Blue Dog Democrat from deep-red Idaho, offered an amendment that would have stripped the new standalone watchdog out of the legislation and replace it with a council of existing regulators to deal with consumer protection laws. Democratic leadership tried to keep the amendment off the House floor. But Blue Dogs and the moderates that make up the pro-business New Democrat Coalition threatened to oppose the rule governing the bill unless that and other amendments were ruled in order.
The U.S. Chamber of Commerce, the Financial Services Roundtable and other industry groups lobbied members to support Minnick’s amendment; the Chamber – which has run a multimillion-dollar campaign against the CFPA — made it a key vote.
Democratic leadership whipped members against it, and House Majority Leader Steny Hoyer (D-Md.) took to the floor to speak against the measure, a sign of leadership’s concern that Minnick could win.
“Very frankly my friends, when you wring your hands about the cost of this referee called the consumer financial protection agency… pales into insignificance in the $1.5 trillion dollars that we have borrowed to get this country out of the deep, deep, deep hole caused by the failure to regulate properly,” Hoyer said, addressing statements from Minnick and his supporters that creating a new stand-alone agency would cost $4.6 billion – a figure Hoyer disputed.
"And it wasn’t the rich guys on Wall Street that paid that price, it was every one of our taxpayers that paid that price. So when you talk about cost, the cost of doing nothing, the cost of not having a referee on the field, skews the game so badly that the little guys, the guys who sent us here, the guys who asked us to protect them from those over which they have now power to protect, they said protect us. And that’s what this debate is about.”
In the end, Minnick’s amendment was defeated, 223 to 208, with 33 Democrats supporting it and eight Democrats not voting.
CFPA’s opponents still embraced the close vote as a sign of progress, and certainly the fate of the provision is cloudy when it comes to the more conservative Senate.
“More than 200 members supporting the Minnick amendment represents a significant victory for real consumer protection reform. It demonstrates that there is support for an alternative to new government bureaucracy, and gives us fresh momentum for an open and deliberative debate in the Senate about more effective approaches to both protect consumers and improve access to credit for our nation’s small businesses,” said Ryan McKee, senior director of the Chamber’s Center for Capital Markets Competitiveness.
House Financial Services Chairman Barney Frank (D-Mass.), who crafted much of the legislation with the Treasury and shepherded it through the House, described the package as the most significant increase of financial regulation since Franklin Roosevelt’s New Deal. He said it was needed to deal with “the catastrophe inflicted on this country by a lack of sensible financial regulation” a year ago.
“The free market – particularly when it is in an innovative phase – works best with a clearly defined set of rules. And that’s what we’ve done,” Frank said. The legislation would “give full [rein] to the creativity of the financial community and their ability to play their role but it will limit the kind of abuses we’ve had.”
Republicans tried to send the entire bill back to committee as well as kill the Troubled Asset Relief Program (TARP), which the Obama administration just announced that it is extending through October 2010.
The motion was defeated, 232 to190.
“Today, House Democrats voted to continue TARP and go right on spending taxpayer dollars with reckless abandon,” charged House Minority Leader John Boehner (R-Ohio).
To many experts, the real meat of the package is the so-called dissolution authority it would grant federal regulators to put failing massive financial institutions to death without the need of taxpayer bailouts.
Administration officials have said that the absence of such authority is what forced them to seek taxpayer money to deal with firms such as Lehman Brothers or the Federal Reserve’s emergency lending powers to rescue mega-insurer AIG.
Under the bill, the fund would collect $150 billion from the largest financial institutions to pay for the cost of winding down one of their own should another crisis strike. Critics charge that taxpayers will still be on the hook since the fund may not cover the cost of another meltdown.
“There is no bailout fund,” Frank said during debate Thursday, taking on Republican charges that the bill amounts to a perpetual bailout fund. “The bailouts of AIG and Bear Stearns, not possible, illegal under this bill. If a company fails, it will be put to death. Yes, we have death panels, but they got the death panels in the wrong bill. The death panels are in this bill. We will spend money to get rid of them in ways that will minimize damage, money that will come from the financial community.”
The legislation also created a systemic risk council of existing regulators to act as the ranger atop the fire tower, keeping its eye on the entire forest rather than the individual tress as existing prudential regulators do.
The legislation also included a controversial – but wildly popular among members of Congress – measure from libertarian favorite Ron Paul (R-Texas) to greatly expand the Government Accountability Office’s power to audit the Federal Reserve.
Sources: Politico, MSNBC, Wikipedia
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