House Passes Sweeping Financial Regulatory Reform: What Will the Senate Do?
The US House of Representatives passed HR 4173, the Wall Street Reform and Consumer Protection Act of 2009, a sweeping financial reform bill Friday that would chage an array of credit, lending and investing practices, set new rules for financial services companies deemed "too big to fail," and create a powerful new federal agency to regulate financial agencies on behalf of consumers. Supporters, including Pres. Obama, say the measures are essential to restoring stability to the financial system and protecting the middle class. Critics say the bill will stifle entrepreneurship and create an unnecessary federal bureaucracy.
The measure passed 232-202 with no Republican votes, and with 27 Democrats giving the bill a thumbs-down. It now moves to the Senate, where it will likely be considered early next year.
If passed, the bill would:
- create a new Comsumer Financial Protection Agency
- impose stricter oversight on companies whose failure could threaten the financial system
- authorize the government to place failing financial giants in receivership, instead of bailing them out. The expenses associated with any such restructuring would be covered by a $150 billion fund to which financial services firms would be required to contribute
- regulate derivatives, the exotic, complex financial products that figured heavily in the Wall Street crisis
In addition, there would be rules of mortgage and credit-card lending designed to bar predatory practices.
Pres. Obama has been pushing hard for the legislation for months. In his weekly address yesterday, he lauded the House's action. He argued that the 2008 financial crisis could have been avoided had the rules proposed by the House been in place. He also shot back at critics and lobbyists who have spent millions to block the legislation:
Last July, Harvard professor and Elizabeth Warren made a video explaining why she thought the time was right for sweeping financial reforms:
Ranking House Financial Services Committee member Spencer Bachus (R-AL) lamented the passage of the House bill. He argued that HR 4173 would lead to more taxpayer-funded bailouts. Instead, he said the House should have embraced a proposed Repbulican alternative that would have let failing banks go bankrupt:
Given the fractious partisan wrangling over health-care reform and climate change legislation, next year's Senate dabate will likely provide plenty of fireworks. When the sparks subside, what reforms, if any, would you like to see put in place?
- OpenCongress page for HR 4173
- Sunlight Foundation: Top Financial Services Committee Members Rely Heavily on Finance Campaign Contributions
- CBO Blog: Budget Savings From Legislative Reductions in Amounts Outstanding Under the TARP Imcludes a link to the CBO estimate that the bill would generate $3.1 billion in revenue next fiscal year in its current form, but some of the projected revenue might come from improvements in the economy that might make it unnecessary to spend bailout funds.
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