A sweeping financial reform bill was passed yesterday by the US Senate, mostly along partisan lines. From CNN:
[quote]The Senate on Thursday afternoon passed the most sweeping set of changes to the financial regulatory system since the 1930s, sending the Wall Street reform bill to President Obama.
The Senate voted 60 to 39 to pass the reforms, ending more than a year-long effort to pass legislation in response to the 2008 financial crisis. Obama is expected to sign the bill into law next week.
The bill aims to strengthen consumer protection, rein in complex financial products and head off more bank bailouts.
To secure enough votes, Senate Democrats made lots of deals, which watered down the bill. For example, Wall Street banks will get wiggle room to make limited risky bets, which is tougher than the current law, but weaker than earlier drafts.
What reform means: The legislation would establish a Consumer Financial Protection Bureau inside the Federal Reserve that could write new rules to protect consumers from unfair or abusive practices in mortgages and credit cards.
The bill creates a new council of regulators, lead by Treasury, that would set new standards for how much cash banks must keep on hand to prevent them from ever triggering a financial crisis. It would also establish new procedures for shutting down giant financial firms that are collapsing.
The measure would put new limits on Wall Street banks’ speculative bets for their own accounts and their ability to own hedge funds, while leaving the door open for some investment activities.
The bill aims to shine a brighter light on some complex financial products, called derivatives, that are blamed for exacerbating the collapse of financial companies such as American International Group (AIG, Fortune 500) and Lehman Brothers.[/quote]
From the same article, we have the GOP response:
[quote]They also object to the fact that the bill virtually ignores the increasingly insolvent government-owned mortgage giants Fannie Mae and Freddie Mac, beyond studying their problems.
“[This bill] is widely expected to stifle growth and kill jobs,” said Senate Minority Leader Mitch McConnell, R-Ky.
In fact, House Minority Leader John Boehner, R-Ohio, called for the repeal of the reform bill hours before the Senate even passed it.[/quote]
I saw Congressman Barney Frank on the Charlie Rose show yesterday talking about the bill. He apparently agrees with the GOP that Freddie and Fannie need to be abolished (his words), but didn’t feel the time is right for a variety of reasons. He admitted his prior support of Fannie and Freddie, but recognizes them now as problems.
For those of you not familiar, Frank is chairman of the House Financial Services Committee. With a key Democrat like him on board with scrapping Fannie and Freddie, the House could have had a massively bipartisan bill. I suspect the reason this didn’t occur is because the parties could not agree on what to do with the bad debts on Fannie and Freddie’s balance sheet. If they can’t determine that, they can’t get rid of those institutions.