BF2S Forums Financial Reform Bill (2009)

Financial Times wrote:

The Obama administration won a victory for its vision of financial reform on Friday, heading off a rebellion by conservative Democrats in the House of Representatives to pass a landmark regulation bill.

The legislation included a new Consumer Financial Protection Agency, an innovation fiercely opposed by banks and some Democrats.

In the final vote, 27 Democrats – and every Republican present – opposed the bill, which gives the government the power to seize and wind down a failing financial institution, to push more derivatives through clearing houses and to give investors a non-binding vote on directors’ pay.

President Barack Obama applauded the passage and said: “The crisis from which we are still recovering was born not only of failure on Wall Street, but also in Washington. 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.”

In one victory for the banks, an amendment that would have allowed a bankruptcy judge more power to reduce mortgages of financially struggling borrowers was defeated.

But the battle centred on the CFPA – one of the most prized parts of President Barack Obama’s regulatory overhaul – and the wrangling between Democrats highlighted differences that could return as the Senate considers its equivalent bill over the next few weeks.

“One of the responsibilities of the consumer agency will be to issue rules to prevent the kind of abusive mortgages that had such a contributing role in our crisis,” said Barney Frank, the Democratic chairman of the House financial services committee, who managed the bill.

Walt Minnick, a Democrat from Idaho, who led the rebellion on the CFPA, which strips power from existing banking regulators, said: “You don’t achieve better regulation by splitting the responsibility between two regulators, in many cases thousands of miles apart.”

David Hirschmann, a director of the US Chamber of Commerce, said: “While there is a laundry list of bad choices that were made by the House, the creation of the CFPA tops the list.”