Apparently a day is all it took.
We reported Tuesday that, although a variety of financial reform advocates believe the new Senate reform package lacks needed teeth, they stopped short of declaring outright opposition to the bill. There appeared to be a sense that provisions — particularly those placing a new consumer-protection agency within the Federal Reserve – could be changed.
On Wednesday, Sen. Bernie Sanders of Vermont stepped up and announced that he would do just that. A left-leaning independent, Sanders indicated that he wasn’t entirely pleased with the reform plan unveiled this week by Sen. Chris Dodd (D-Conn.) – but the outspoken Sanders did not say he was against it, either.
Rather, in a statement the outspoken Sanders calls the regulatory overhaul a “a step forward,” but adds in the same breath that “much more needs to be done to regulate Wall Street to prevent another severe financial crisis from happening again.”
The chairman of the Senate Banking Committee, Dodd took the wraps off his financial reform proposal after talks broke down with Republicans over a bipartisan bill.
The overhaul of financial regulation, including the creation of a CFPA, is designed to avert another economic meltdown as that occurred in 2008 and required a massive taxpayer-funded bailout. The proposed reform of the rules that govern the nation’s financial industry would be the most sweeping seen since those enacted after the Great Depression.
Sanders says he would propose amendments to the financial overhaul legislation to limit credit card interest rates and discourage Fed secrecy. He also says that he will work with colleagues to strengthen consumer protections, curb unbridled market speculation and break up “too big to fail” banks.
“We have got to make it crystal clear to Wall Street that the era of wild speculation and greed is over. We need a Wall Street which invests in the job creating productive economy, and not one that continues the unregulated gambling activities which have been so devastating to the middle class of our country,” he says. “Unfortunately, the financial reform bill, as currently written, does not go far enough in making the kinds of changes we desperately need.”
The Dodd legislation would, as President Obama wants, create a new Consumer Financial Protection Agency (CFPA). But unlike financial reform legislation approved by the House in December that would make the CFPA an independent entity, Dodd would submerge the agency within the Federal Reserve.
Like most other financial reform advocates, Sanders finds that unacceptable. He has been a tough critic of the Fed, particularly under current Chairman Ben Bernanke. Sanders led an unsuccessful attempt in the Senate to deny Bernanke a second term at the top of the Fed.
Sanders says he would insist on an independent agency to protect financial consumers. “Putting such an agency at the Federal Reserve is like putting the fox in charge of the hen house,” he says. “Congress already has given the Fed the chance to enforce consumer financial protection. It failed miserably.”
The senator also calls for greater transparency at the Federal Reserve. The legislation as proposed by the Senate Banking Committee chairman would allow the Government Accountability Office (GAO) to audit the Fed’s emergency lending programs, but bar GAO from naming loan recipients and detailing the terms.
“As long as the Federal Reserve is allowed to keep secrets about its loans, we will never know the true financial condition of the banking system. The lack of transparency could lead to an even bigger crisis in the future,” Sanders says.
Sanders says that any meaningful financial reform bill must stop big banks from charging credit card interest rates as high as 35 percent. He proposes legislation to impose a 15-percent cap on what lenders may charge credit card customers.
Finally, Sanders says the financial reform bill does not do enough to reform credit default swaps and other arcane financial products that led to the collapse of Lehman Brothers and Bear Stearns, resulted in a $182-billion bailout of American International Group, and precipitated the worst financial crisis since the Great Depression. “Many of these financial weapons of mass destruction don’t just need to be regulated, they should be banned,” he says.
Financial reform is high on the White House to-do list, but as the Senate currently is embroiled in the endgame for healthcare reform, it is not immediately clear when the lawmakers would begin to consider Dodd’s bill.
The publisher of the news site On The Hill, Scott Nance has covered Congress and the federal government for more than a decade.