US House passes sweeping financial overhaul
The House financial overhaul bill covers everything from financial giants to individual consumers. But lobbyists are lined up to fight it, and deals will have to be made with some lawmakers as the Senate considers its own bill.
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The sprawling bill targets the biggest financial groups and the vast, unregulated derivatives market that spawned the crisis. It also creates a new federal agency to raise the profile of consumer protection in Washington.
It’s the first step in a process that now shifts to the Senate, where bipartisan teams recently began work on a draft bill for the Senate Banking, Housing and Urban Affairs Committee. Negotiations are likely to carry on into the new year.
But for the army of interest groups that has flooded Washington with lobbyists and record campaign contributions, the campaign to shape a bill more to their liking only accelerates.
It’s also a legislative battle that is forcing important choices within a highly diverse congressional majority. Without a single Republican vote, Democrats had to pass this bill, including overcoming “poison pill” amendments, by cutting deals within their own ranks – a task far tougher than the final vote, 223-201, suggests.
The top priority for the financial community in this bill was to derail the proposed Consumer Financial Protection Agency – a centerpiece of the Obama Administration’s approach to making consumer protection a more urgent priority for federal regulators.
“The crisis from which we are still recovering was born not only of failure on Wall Street, but also in Washington,” said President Obama in a statement after the vote. “We have a responsibility to learn from it, and to put in place reforms that will promote sound investment, encourage real competition and innovation, and prevent such a crisis from ever happening again."
The CFPA is endowed with broad powers to regulate financial products sold to consumers, now assigned to the Federal Reserve and other federal banking agencies – and more. The independent agency can mandate regulations, issue subpoenas for documents and testimony, bring civil actions, and refer criminal matters to the Justice Department. Small banks, accountants and tax preparers, real estate brokers, auto dealers, and pawn brokers got a pass.
Plans for a new agency focused exclusively on consumer protection alarmed the business and financial community, which launched ad campaigns charging that the agency would stifle innovation, raise interest rates, cut jobs, and cut choices to consumers.