Finally taking the time to try and change the rules of Wall Street, the House passed the Wall Street Reform and Consumer Protection Act yesterday with a 223-202 vote. No Republicans voted for the bill and 27 Democrats voted against it.
The bill as passed would create the Consumer Financial Protection Agency, increase oversight of hedge funds and credit rating agencies, and impose regulations on the derivatives market. An amendment that passed 304-124 would create an exception from these derivative regulations for nonfinancial companies that use derivatives as a hedge against risk instead of as speculative investments; it would also exempt those businesses deemed too small to have an impact on the financial system. The existence of these exceptions run contrary to what President Obama had originally envisioned for regulations of the derivatives market. The bill also grants the FDIC the power to monitor the economy for systemic risk and the authority to manage a $150 billion fund to help take apart failed financial corporations. The bill would allow the GAO to audit monetary policy decisions made by the Federal Reserve. One amendment that failed to pass (241-188) would have allowed bankruptcy judges to modify the terms of mortgages to help homeowners avoid foreclosure.
The bill will now head to the Senate, where it will undoubtedly be changed in committee and take its time going through the system. It is unexpected that a Senate version of the bill would be passed before next year. And of course, the longer it takes to pass the bill, the less the need for such a bill weighs on the public's mind. If companies lay low and do the intelligent thing, like Goldman-Sachs limiting executive compensation even though, having already paid back the TARP money, it is no longer subject to 'pay czar' Kenneth Feinberg's rules, public outrage will die down as the economy improves. And, once some heavy lobbying takes place, the final version presented to President Obama could be even weaker than what we currently have.
