The Senate has approved a bill that would impose sweeping new regulations on the financial industry. But some reform advocates argue that the legislation doesn’t go far enough — and promise to come back to enact further new reforms.
Senators Thursday passed a legislative package of financial reforms that they’ve had under consideration for three weeks by a vote of 59-39, with four Republicans joining Democrats in giving their bill their approval.
The vote brings President Obama to the brink of his second major legislative victory in a year, after enacting a new healthcare law in March. Obama has long sought new financial regulations to prevent another meltdown such that which occurred in 2008 and resulted in massive taxpayer-funded bailouts of industry. Lawmakers must now reconcile the Senate version with a somewhat-different bill that the House approved last year in a conference committee and then approve a single, final bill that can be sent to Obama’s desk for the president to sign into law.
“As a result of the greed, recklessness and illegal behavior of Wall Street, this country was plunged into a horrendous recession. While this bill does not go as far as I would like, it is a strong beginning in the effort to re-regulate huge financial institutions and to bring transparency to their often nefarious activities,” says Sen. Bernie Sanders, a left-leaning Vermont independent who has been pushing for strong consumer protections throughout the process of financial reform.
Ed Mierzwinski, consumer program director of the U.S. Public Interest Research Group, a Washington-based organization that has advocated for strong new financial protections for consumers, also chose to see the positive in the new bill.
“This bill to rein in Wall Street is a bill that Main Street will like. While the bill isn’t perfect, it includes strong measures to rein in Wall Street’s casino bets, regulate the shadow derivatives markets, protect consumers and prevent future economic meltdowns,” Mierzwinski writes on his blog. “We urge Congressional leaders to use the conference process to select the strongest provisions of the House and Senate bills while rejecting the efforts of lurking Wall Street lobbyists to weaken or delay passage of a strong final law.”
In particular, Mierzwinski cheered the defeat of a Republican amendment to the bill that would have exempted car dealers from oversight of a new Consumer Financial Protection Bureau, and instead “leaving in place broad authority for the consumer watchdog over non-bank lenders.
“This is an important improvement over the House passed bill,” he says. “Passage of the Restoring American Financial Stability Act includes a strong, independent Consumer Financial Protection Agency, preserves some authority for state attorneys general to enforce the laws, opens up the shadow markets where derivatives are traded, and ends, once and for all, ‘too big to fail.’”
More Left To Be Done
Not all reform supporters are as upbeat, however.
“The Senate bill would have been a modest but respectable reform package in 2007, before the financial crash, and it does contain several strong, positive elements — in particular the creation of a Consumer Financial Protection Bureau, restrictions on ‘swipe fees’ at the cash register, useful regulation of credit rating agencies, and an audit of the Federal Reserve,” says Robert Weissman, president of Public Citizen, a Washington watchdog organization. “But after all the damage inflicted by Wall Street, the bill should be much stronger. Even though it plunged the nation into the worst recession since the Great Depression, Wall Street has enough power on Capitol Hill to thwart reforms that would prevent it from doing the same all over again.”
In particular, Weissman complains that the reform bill would not break up the megabanks that were “too big to fail,” and doesn’t do enough to clamp down on the “casino economy,” in which Wall Street risks too much on speculative trading.
While Weissman applauds the “strong derivatives regulation” in the Senate bill, he argues that it has “one major, accidental loophole — no enforcement.”
“If this is fixed, then the derivatives reforms in the bill will significantly reform the sector that was perhaps most responsible for the financial crisis. Without the fix, the bill falls far short,” he says.
But regardless of whether they are pleased or disappointed with the Senate bill as it stands, financial reform advocates vow to come back for more.
“Just as there were multiple rounds of reform in the 1930s, so we should look now to further reform efforts, fueled by more revelations about conflicts of interest, self-dealing, deception and fraud,” Weissman says.
Sanders of Vermont says he is disappointed that the Senate could not garner the necessary votes to lower interest rates on credit cards or to begin the process of breaking up the largest financial institutions, “which are the cause of so many of our problems.
“I intend to continue that effort until we succeed,” the senator adds.
The publisher of the news site On The Hill, Scott Nance has covered Congress and the federal government for more than a decade.