By Mark Huffman
ConsumerAffairs.com
May 21, 2010
With Senate passage of financial reform legislation, a conference with the House, to work out differences in the two measures, is all that remains before a final bill heads for President Obama's desk.
Of perhaps most importance to consumers is a Consumer Financial Protection Agency, which is included in both versions. There are important differences, however, in how the two bills view the consumer watchdog.
The House bill establishes an independent, stand-alone Consumer Financial Protection Agency. The Senate version establishes a Consumer Financial Protection Bureau within the Federal Reserve, which currently has responsibility for protecting consumers in financial matters.
Still, consumer groups enthusiastically hailed Senate passage of "fin-reg" as something that was long overdue.
"This is a crucial step toward delivering on the promise Congress made when it called on taxpayers to bail out the big banks, that it would adopt comprehensive financial reform," said Travis B. Plunkett, Legislative Director of the Consumer Federation of America. "If the best reforms from the Senate and House bills are melded together, the result will be a bold new law that will protect consumers and investors from abusive practices and the economy from financial shocks for generations."
"The financial crisis revealed gaping holes in our financial regulatory structure," said CFA Director of Investor Protection Barbara Roper. "This bill, while not perfect, takes significant steps to close those regulatory gaps and make our financial system both safer and more stable."
Worried about lobbyists
Michael Calhoun, president of the Center for Responsible Lending, also praised the Senate action, but worried that Wall Street lobbyists would try to weaken the bill during conference.
"In this final stretch we hope lawmakers will resist Wall Street's efforts to water down the bills' strong provisions," Calhoun said. "First among these is the creation of strong a consumer financial protection agency with power to establish common-sense lending rules. Additionally, we urge Congress to ensure these rules are applied to all lenders--including auto dealers--and to resist attempts to give firms 'veto power' over proposed rules before a full public debate."
Most consumer groups found something they didn't like in the Senate bill, but expressed satisfaction that Congress was finally taking action to try and protect consumers.
"While this bill is not perfect, it represents our leaders' renewed commitment to restoring balance in our financial system," said Heather C. McGhee, of the public policy group Demos. "We congratulate the Senators and staff who succeeded in creating a strong policy framework despite a finance lobby that spent $1.4 million a day to weaken and defeat it."
The measure also addresses the issue of derivatives trading, a complex and little-understood aspect of Wall Street that many blame for the 2008 credit meltdown.
Despite intense opposition, the Senate passed a bill that requires the majority of standardized credit swaps to go through central clearing and trade on a transparent exchange. It also imposes significant new requirements on swaps dealers and major swaps participants to prevent abusive practices and ensure that they are financially sound.
CFA says the area of investor protection falls short of expectations. The group says the Senate bill does nothing to ensure that brokers have to put their customers' interests ahead of their own when they give investment advice.
Select members of the House and Senate will now meet to combine the two bills into one piece of legislation that is expected to be passed by both chambers and sent to the president's desk to be signed into law.
