May 21, 2010
Senate Financial Reform Bill Makes Good Headway But Should Be Stronger
Statement of Robert Weissman, President of Public Citizen
The Senate bill contains several strong, positive elements – among them, the creation of a Consumer Financial Protection Bureau, restrictions on “swipe fees” at the cash register, useful regulation of credit rating agencies and an audit of the Federal Reserve – and we welcome its passage.
But after all the damage inflicted by Wall Street, the bill should be much stronger. Even though it plunged the nation into the worst recession since the Great Depression, Wall Street has enough power on Capitol Hill to thwart reforms that would prevent it from doing the same all over again.
The bill leaves the mega-banks intact, so that they will continue to maintain a vise grip over the financial system, the economy and our democracy. And the bill fails to clamp down sufficiently on the casino economy.
Importantly, however, the bill does contain significant derivatives reform language from U.S. Sen. Blanche Lincoln (D-Ark.). By forcing derivatives trading out of the shadows, the Lincoln provision would – with one vital fix – significantly reform a sector with major responsibility for the financial crisis. The strong derivatives regulation contains one major, accidental loophole – no enforcement – that must be remedied in conference. The Lincoln provisions would also force commercial banks out of the derivatives speculation business, an important step to redirect banks to provide credit to Main Street, rather than engage in speculative betting.
A vital measure of the ultimate significance of the Senate action is whether the derivatives reform measures can be protected from the swarm of Wall Street lobbyists who will seek to eliminate, eviscerate, defang or otherwise undermine the measures’ purpose and effect.
This legislation is not the end of the Wall Street reform effort. Just as there were multiple rounds of reform in the 1930s, we should look now to further reform efforts, fueled by more revelations about conflicts of interest, self-dealing, deception and fraud.
Public Citizen is a national, nonprofit consumer advocacy organization based in Washington, D.C. For more information, please visit www.citizen.org.