Wall Street’s fingerprints evident on financial reform bill
Congress pledged to tighten regulations on Wall Street after its role in the recession. The industry is reaching into its deep pockets to shape the financial reform legislation to its liking.
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“There’s a tremendous cost, whether to industry or to consumers, in having different rules across every state to do the same mission,” said Representative Bean in an interview.Skip to next paragraph
Consumer groups and state attorney generals counter that state regulators are an important check on federal regulators, who did not act soon enough to curb abuses that produced the financial crisis.
“The meltdown of the financial institution was also a meltdown of the federal regulators ... that had a big part of this,” says Iowa Attorney General Tom Miller, who worked with House finance panel staff on this issue. “To foreclose the states from doing more is wrong and foolish.”
Attorney General Miller, in an interview, says that compromise is not too damaging. But “there will clearly be another fight in the Senate,” he adds. “The special interests will try very hard to gain advantage by keeping the states on the sidelines in enforcing the laws. We will fight back as best we can.”
Bean dismisses charges from consumer groups that the $393,000 she received from the financial services industry in 2009 – about half her campaign donations to date – influenced her stance on the bill. “Agreeing with the industry on one thing doesn’t mean that they influenced the whole package,” she says, adding that she actively backed many provisions that banks opposed, including the consumer financial protection agency.
The finance industry also won exemptions to new rules for the vast derivatives market at the center of the financial crisis. Reformers wanted all these unregulated trades to be conducted on public exchanges.
“Thirty percent of the market is completely exempted from any exchange. It’s a huge loophole, and we know that if a certain type of [hedge fund trader] is exempt from oversight, the market is going to gravitate to that to escape regulation,” says Carmen Balber, Washington director for Consumer Watch.
Two key amendments to close those loopholes were defeated in floor votes. Commenting on the role of Wall Street money in affecting these votes, Rep. John Larson (D) of Connecticut, a cosponsor of an amendment to ban “abusive derivatives,” said: “I would never categorize my colleagues’ votes, but it’s another reason why we need campaign finance regulation.” The measure failed 150 to 279.