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House Financial Reform Bill Bequeaths Bankers $4 Trillion

By Bill Lindner     Jan 3, 2010 in Politics
"The Wall Street Reform and Consumer Protection Act of 2009," a 1,279 page 'reform' bill passed by the House, does little to protect consumers while insuring up to $4 trillion to Wall Street from the government should the need arise.
The House of Representatives passed H.R. 4173 -- "The Wall Street Reform and Consumer Protection Act of 2009" (PDF) -- a 1,279 page bill filled with all kinds of useless pork that ends up doing more harm than good for consumers while enriching bankers. The Senate hasn't passed its own reform bill yet.
On September 14, 2009, in remarks by President Obama on financial rescue and reform from Federal Hall, President Obama said: "...We will not go back to the days of reckless behavior and unchecked excess that was at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses. Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall..." But, if H.R. 4173 (PDF) became law in its present form, that statement would be rendered entirely false.
The financial reform legislation from the House, Financial Services Committee Chairman Barney Frank's baby, allegedly addresses everything from banks that are too-big-to-fail to asleep-at-the-wheel credit-ratings companies to protecting consumers from greedy lenders. Instead of breaking up the too-big-to-fail banks and financial institutions, responsible for causing the global meltdown -- actions that have continued to this day -- over a year ago, the bill would make them $4 trillion stronger.
Since 1989, the finance, insurance and real estate sector has reportedly given Frank $3.1 million in contributions. As of early December 2009, members of the House Financial Services Committee have reportedly received, on average, $138,422 in campaign contributions from the financial services industry -- more than twice what non-committee members have taken in. Ten committee members who cosponsored two financial industry-friendly amendments received an average of about $200,000 from the financial sector. Despite pledges to tighten financial regulations, the bill passed by the House of Representatives reveals that Wall Street's large investment in Congress is paying plentiful returns.
H.R. 4173 Insures that Government Will Rescue Wall Street if the Need Arises
34 House members who offered amendments to weaken consumer protections reportedly received at least $3.8 million from the financial services sector since the beginning of 2009. 279 House members voted against two key amendments that would have closed loopholes in the $6oo trillion derivatives market. The influence of the financial sector in H.R. 4173 reveals the need for reforming campaign finance regulations. The Financial sector has nearly five lobbyists for every member of Congress.
Bloomberg News Columnist David Reilly sat down and read the the whole 1,279 page document and found some interesting, albeit disturbing, information. Instead of saving the consumers and restricting the actions responsible for creating the global meltdown, the bill makes no mention whatsoever of the 'too-big-to-fail banks. How many in the House of Representatives actually read the legislation before they vote on it?
Taxpayers were hoping that Wall Street's gravy train was coming to a halt. It's not. Bankers are ensured huge giveaways. If passed in its current form, H.R. 4173 (PDF) insures that the government will once again rescue the banks and Wall Street if the need arises.
Subtitle H--Additional Improvements for Financial Crisis Management (page 436 of the H.R. 4173 (PDF) bill) amends Section 13 of the Federal Reserve Act by inserting a new subsection dealing with Financial Crisis Management that, after a couple of procedures and certification of the President that an emergency exists, may authorize the Federal Reserve Bank -- which isn't Federal at all -- up to $4 trillion in emergency funding the next time Wall Street crashes. So much for no more bailouts.
As noted by David Reilly, admitting you have a problem is the crucial first step toward recovering. Instead, the Fed will receive twice as much as it did before. The funds can't be given to the Fed unless "there is at least a 99 percent likelihood that all funds and interest will be paid back." The financial sector doesn't need to worry though. There are additional bailouts in the bill as well. In a crisis, the government will back financial firms' debts at the taxpayers expense.
None of the Issues has Anything to do With Fixing Too-Big-To-Fail Banks
H.R. 4173 (PDF) creates a council of regulators allegedly to spot risks to the financial system and big financial firms and it creates a new Consumer Financial Protection Agency with broad powers to protect consumers from financial products that are deemed unsafe. But of course, these regulators will be comprised of members who either missed the problems that led to the current crisis, or looked the other way. The group will supposedly report to Congress and be able to restrict the ability of a financial firm to trade for its own account.
The bill allows incentive-based payment arrangements to be prohibited by regulators, though we've seen how well that's worked in the past. It also adds more government jobs, calling for more than a dozen agencies to create a 'Director of Minority and Women Inclusion' position. People in those posts will be appointed by the President. None of these issues has anything to do with dealing with the issue of the too-big-to-fail banks.
Almost two dozen studies are authorized by the bill. About a quarter of those studies are related to credit-rating companies, one area in which the reform legislation fails miserably in the concept of meaningful change.
The bill also contains a provision that, in the event of another government request for emergency aid to further enrich the financial industry, limits debate in Congress to just 10 hours. As also noted by David Reilly, it would be nice if legislators actually wrote legislation that tackled the real issues stemming from the financial crisis, ended bailouts, and wrote far shorter bills.
More about Financial reform, House representatives, Bankers, Barney frank, Bailout
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