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Senate Passes Financial Reform

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After lengthy debate in the Senate, financial reform passes with a 59-39 vote. Congressional leaders must now reconcile it with the House bill that was passed in December.

Senate Passes Financial Reform

NCTC Staff at a Chicago Rally for Financial Reform

On Thursday, May 20, the Senate passed a financial regulatory reform bill which increases government oversight of the banking system and financial markets.  In an effort to prevent the recent economic crisis, the bill would reshape the roles of various federal agencies and increase the power of the Federal Reserve.

Speaking in the Rose Garden on Thursday afternoon, President Obama said "the recession we're emerging from was primarily caused by a lack of responsibility and accountability from Wall Street to Washington." The President described the Senate vote as a victory over the financial industry and the "hordes of lobbyists" that tried to kill the legislation.

Consumer advocates and NCTC affiliates fought an overwhelmingly large banking lobby to advocate for the following measures in the Senate bill:

  • Consumer Protection - Creates a federal regulator to write and enforce rules protecting consumers from risky financial products and practices. The House bill creates an independent agency while the Senate bill creates a bureau inside the Federal Reserve
  • Auto Dealers - While the House bill exempts auto dealers from the consumer regulation, the Senate bill does not include this dangerous exemption.
  • Too Big to Fail - Creates a process for the federal government to liquidate failing companies at no cost to taxpayers
  • Derivatives - Establishes federal oversight of derivatives.

 For more information on the financial reform legislation, The New York Times provides a good overview of the major issues addressed in the House and Senate bills.

While there are differences in the House and Senate bill, lawmakers are estimating that the bills will be reconciled in Conference over the next few weeks. Advocates must continue to reach out to their Members of Congress and ask that they take a strong stance against the continued risky practices of the banking industry.

The Consumer Federation of America lists the following concerns with the Senate bill:

  • Authority over nonbanks - The current Senate bill does not give the Consumer Financial Protection Bureau (CFPB) enforcement authority over small nonbanks, including payday lenders. The amendment to give the CFPB such enforcement authority was not considered. The agency has such authority in the House bill.
  • Federal Preemption - State attorneys general will be able to take action to enforce new consumer rules against banks that violate those rules if the new Bureau or bank regulators do not. But the bill makes it harder for states to play their traditional role as first responders if banks engage in unfair or deceptive actions that are not yet covered by federal protections.
  • Extra Requirements on CFPB Rules - The Senate passed an amendment that would require the consumer bureau to share proposed rules first with small businesses, including those that offer abusive financial products, before getting input from the public. The amendment could result in dangerous rule-making delays by mandating that a committee of regulators go through an additional review process that is not currently imposed on any financial regulator. The House bill does not include this provision.

 

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