• Home
  • About
  • Links

Feeds:
Posts
Comments
« Does BP have the market on reckless cornered?
Public Citizen researchers on medical device safety »

Congress passes financial reform but much more must be done to rein in Wall Street

July 15, 2010 by Robert Weissman

More than a year and a half after Wall Street crashed the global economy, Congress has finally taken important action to rein in the Wall Street titans. The Wall Street reform bill is a crucial first step, passed despite the financial sector’s enormous investments in lobbying and campaign contributions. But Wall Street remains far too powerful in Washington, with the result that this bill does not contain crucial reforms that must be included in subsequent reform efforts.

On the positive side of the ledger, the bill contains stronger consumer financial protections and curbs on some of the worst practices in the derivatives markets.

Consumer Protection: The bill consolidates and streamlines existing consumer financial protection by creating a Consumer Financial Protection Bureau. This bureau will have the authority to crack down on unfair, deceptive and abusive practices in connection with consumer products such as payday loans, credit cards and mortgages by using new rules and enforcement powers. It also will have authority to ban particularly harmful practices such as forced arbitration. Had the bureau been in place and operating effectively during the run-up to the financial crisis, it would have prevented the predatory and abusive mortgage lending practices that led directly to the crash.

Transparency, Oversight and Stability in the Over-the-Counter (OTC) Derivatives Market: The bill also makes major progress on reining in reckless and unfair derivatives practices. It restricts the most egregious practices, such as federally insured banks engaging in risky proprietary trading and financial institutions making bets against their own clients. It requires the vast majority of previously unregulated OTC derivatives to be cleared and traded on regulated exchanges. Derivatives were a critical cause of the financial crisis; new clearing and exchange rules should go a long way toward stabilizing the system.

There are many other positive components of the bill. How effective they turn out to be will depend crucially on implementation over the next months and years. If Wall Street can regain control of the regulatory process, then many of the potential benefits from this bill will be lost.

Unfortunately, many important reforms are missing from the bill. Some key elements were jettisoned or weakened in the conference process. These include limits on commercial banks owning hedge funds, and the bulk of the requirement that commercial banks spin off their derivatives trading desks.

Other key reforms are absent from the bill. These include meaningful restraints on executive and top trader compensation, a financial speculation tax and rules to break up the biggest banks. The megabanks that now dominate the financial sector – which is more concentrated than at the onset of the financial crisis – pose a continuing threat to our economy and democracy.

Particularly because it does not break up the megabanks, this bill does not ensure that we will not have a repeat of the financial crisis. Another round of reform will be needed to achieve that objective.

Nonetheless, the bill is an extraordinary achievement for regular Americans and will be enacted into law despite a massive and deceptive opposition campaign by Wall Street and its allies.

We have lots more to do, but today we have achieved what many thought impossible just months ago.

Robert Weissman is president of Public Citizen.

Share this:

  • Email
  • Facebook
  • Twitter
  • Reddit

Like this:

Like Loading...

Related

Posted in Congress, Consumer Protection, Financial Regulation | Tagged banking, financial reform, wall street |

  • Follow Our Tweets!

    • Demand the Senate pass Medicare for All: publiccitizen.salsalabs.org/tell-senate-pa… 57 minutes ago
    • Universal health care COULD NEVER WORK ...unless you live in: Australia Austria Belgium Canada Chile Czech Republ… twitter.com/i/web/status/1… 1 hour ago
    • Amazon has a shareholder meeting tomorrow where they will vote on important proposals that: 1. Expose how it avoi… twitter.com/i/web/status/1… 3 hours ago
  • Support Our Work

  • Socialize With Us

  • Categories

  • Visit Our Other Sites

    • Public Citizen Read our reports and publications
    • Eyes on Trade Challenging globalization
    • Citizen Energy Fighting for a sustainable future
    • Law & Policy Justice for consumers
    • Texas Vox Activism from the Lone Star state
    • Worst Pills An independent pharma watchdog
  • Recent Comments

    Wellescent Health Bo… on The Midmorning Refill: Nancy P…
    Democracy Now! discu… on When it comes to cheating the…
    Marcia Everett on The Midmorning Refill: Mother…
    David Peterson on When it comes to cheating the…
    otto mandarin on Weissman: It’s not a pre…
  • Flickr Photos

    "Swamp Monster" DOI Video"Swamp Monster" DOI Video"Swamp Monster" DOI Video
    More Photos
  • access to justice Activism arbitration Avandia bailout banking big oil big pharma BP campaign contributions Campaign Finance campaign finance reform Chamber of Commerce Citizens United Citizens United v. FEC Climate Change Congress Consumer Protection corporate power credit cards DISCLOSE Act Don't Get Rolled economics economy elections Energy energy & climate EPA Ethics fair trade FDA fec financial reform first amendment free trade global warming gop government reform gulf of mexico Halliburton Health health & safety health care health care delivery health care reform Jon Stewart Lobbying lobbying and government ethics lobbyists McCain-Feingold medical malpractice money in politics nafta obama offshore drilling oil oilspill oil spill Open Government petition pharma political ads political advertising political contributions politics Rally to Restore Sanity scotus single-payer stephen colbert Supreme Court Transparency Transportation U.S. Chamber of Commerce wall street wto
  • Archives

  • Meta

    • Register
    • Log in
    • Entries feed
    • Comments feed
    • WordPress.com
  • NetworkedBlogs
    Blog:
    Public Citizen - Citizen Vox
    Topics:
    progressive, reform, politics
     
    Follow my blog

Create a free website or blog at WordPress.com.

WPThemes.


Privacy & Cookies: This site uses cookies. By continuing to use this website, you agree to their use.
To find out more, including how to control cookies, see here: Cookie Policy
  • Follow Following
    • citizenvox.wordpress.com
    • Already have a WordPress.com account? Log in now.
    • citizenvox.wordpress.com
    • Customize
    • Follow Following
    • Sign up
    • Log in
    • Copy shortlink
    • Report this content
    • View post in Reader
    • Manage subscriptions
    • Collapse this bar
loading Cancel
Post was not sent - check your email addresses!
Email check failed, please try again
Sorry, your blog cannot share posts by email.
%d bloggers like this: