Donate Today

The U.S. House of Representatives is debating the financial
reform package right now. It would, among many other things, create a new regulator
to do the consumer protection the banking regulators ignored, and require Wall
Street speculators to meet minimum standards and do their gambling in the light of day.

What I’m having a hard time understanding is how an industry that stole Americans’ money, gambled with it and pocketed billions, then came begging to taxpayers for a bailout when their bets went sour, has managed to keep the brakes on financial reform for this long.

The $28 million big
banks, insurance companies and Wall Street poured into the U.S. House of Representatives this year didn't play a small part in that delay. But debate finally started on the House floor yesterday.
Here are some of the big issues, and whether they’ve gone the right way for consumers.

Will your state be able to protect you?

The answer: Yes and No.  Rep. Melissa Bean and 6 co-sponsors offered an amendment to
the bill that would have stripped the states of the ability to
protect residents from the worst financial abuses. They had already won
concessions that allowed some preemption of state laws. The New Democrat coalition held
the bill hostage last night
, threatening to block a vote on the floor because they wanted more limits on the states. They forced changes to the bill that weaken states’ ability to enact
consumer protections. The end result: Consumer protections rolled back on a key priority
for the banking industry, but not as far as they wished.

It sounds wonky, but in the wake of the financial
meltdown, most regular citizens would agree
that local representatives should be able to act when they find out banks, lenders or credit card companies are hurting consumers. The amended bill
preserves some, but not all, of that authority.

There used to be a firewall between your bank and your
casino. Really.

For 65 years, a law called Glass-Steagall kept commercial
banks (the ones where you deposit your paycheck every month) and investment
banks (the ones called JP Morgan that make money by risking money) from
operating under the same roof. One good reason was to keep banks from using
your savings to speculate in exotic securities. Another was to hold down the
size of banks. When that law was repealed in 1989 it legitimized the ‘too big
to fail’ banks that mixed deposit and securities banking and helped drag us into
the Great Recession. An amendment offered to the reform bill by Reps. Hinchey,
Conyers, DeFazio, Inslee and Tierney to start rebuilding those walls wasn’t allowed
a vote on the House floor.

Will bets by speculators ever be regulated?

Good question. This bill doesn’t resolve it. It addresses
the need to bring the multi-trillion-dollar, completely unregulated,
derivatives markets (remember credit default swaps?) out from the shadows and into the light. Exemptions from
regulation in the current version of the bill, that are supposed to protect
companies who legitimately need to hedge their business risk (think airlines
hedging the cost of jet fuel
), in fact leave loopholes that speculators are
guaranteed to take advantage of. A good amendment to narrow these exemptions by
Reps. Stupak, DeLauro, Larson and Van Hollen is currently under debate. Debate just ended but vote was postponed.

The House is expected to vote tomorrow. And though this bill is far from perfect, and isn't even half the battle (the Senate Banking committee has yet to approve any reform bill), it will be one indicator as to whether big banks and Wall Street, or Americans fighting to stay in their jobs and in their homes, have the bigger voice in Congress.