Financial Reform Proceeds; Consumer Watchdog may end up Independent After All
Last night the Senate passed a bill which will eventually lead to the largest overhaul of the financial sector since the 1930’s. This is not hyperbole. When the conference committee finishes its work combining the Senate and House versions and President Obama signs his name, a new set of rules will be in place to oversee the provision of financial services on both Wall Street and Main Street.
While there were a number of debates and provisions being discussed that did not get into the final bill which would have made for better policy, it is hard to argue that many of the proposed changes will establish a better set of ground rules to protect both individual households and the broader economy. There will still be a premium placed on effective regulation, foresight, and governance, but there will be a legal basis to act when individual firms grow too large or peddle excessively risky products.
We will be looking into the final details of the bill and sharing our assessment. One of the areas we have been tracking is the fate of the consumer watchdog agency. The House bill called for a stand alone agency while the Senate bill proposes to place it autonomously within the Federal Reserve as pushed for by Sen. Corker, Republican from Tennessee. Normally the Senate holds the upper hand in most conference committee deliberations but in this case we might see the House approach win out as Sen. Corker declined to support the final bill. Barney Frank, chair of House Financial Services Committee, reports that the Fed does not really want to house a Bureau it can’t control; and he offers the helpful and colorful the analogy:
“The Fed feels it’s like, you know, having your ex-wife’s brother living in the house after you got a divorce.”
Here’s a link to Tim’s account of the final machinations before the bill’s passage which took out both the proposed exemption of car title and loan peddlers and so-called Volker rule to restrict proprietary trading. While the Volker rule would have been beneficial to include, I had major concerns about the auto dealer exemption. And for those of you, like me, who have appreciated the active voice of Elizabeth Warren weighing in on the need for a powerful new set of rules to protect consumers and the national economy, she releaed a statement giving the Senate bill a thumbs up, saying:
“No bill that deals with big issues is ever perfect, but the Senate’s Wall Street reform package will go a long way toward preventing the kinds of abusive practices that brought our economy to its knees.”
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