July 1, 2010
Public Citizen Applauds House of Representatives for Passing Wall Street Reform, Urges Senate to Follow Suit
Statement of David Arkush, Director of Public Citizen’s Congress Watch Division
The U.S. House of Representatives took a welcome step late Wednesday when it passed the conference report on the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Senate is expected to take up the conference report soon, likely sending the legislation to President Barack Obama the week of July 12.
Enactment of this bill would be a significant, initial victory for Main Street over Wall Street – and one that Congress should expand on soon. It contains several important elements. The two most notable are substantially 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 (CFPB). 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. The CFPB is critical to preventing predatory mortgage lending and other abusive practices that formed the basis of the financial crisis.
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.
These are only two of many areas in which the bill makes substantial improvements for the American people. The bill establishes a strong base of financial reform that can and should be built upon in the near future.