Wall St. over­haul passes

Bill aims to rein in big banks, pro­tect con­sumers, in­vestors

Austin American-Statesman - - FRONT PAGE - By Jim Puz­zanghera

WASHINGTON — Nearly two years af­ter a fi­nan­cial cri­sis trig­gered the worst re­ces­sion since the Great De­pres­sion, the Se­nate ap­proved bold and con­tro­ver­sial leg­is­la­tion aimed at pre­vent­ing a re­peat — and set the stage for a show­down over the is­sue in this

Gold­man Sachs to pay record fine, B7 fall’s midterm elec­tions.

The 60-39 vote Thurs­day was a ma­jor vic­tory for Pres­i­dent Barack Obama and Demo­cratic lead­ers and marked the sec­ond land­mark over­haul — the first was health care re­form — that the Obama ad­min­is­tra­tion has pushed through Congress this year.

Obama is ex­pected to sign the fi­nan­cial over­haul bill next week in an elab­o­rate cer­e­mony tout­ing it as ev­i­dence that Democrats are stand­ing up for Main Street against the pow­er­ful fi­nan­cial in­dus­try and its Repub­li­can al­lies.

Sup­port­ers said it gives the govern­ment desperately needed tools to avoid fu­ture cor­po­rate bailouts and pre­vent fi­nan­cial com­pa­nies from goug­ing con­sumers on mort­gages and other fi­nan­cial prod­ucts.

“Be­cause of this re­form, the Amer­i­can peo­ple will never again be asked to foot the bill for Wall Street’s mis­takes,” Obama said. Pres­i­dent to sign bill next week.

House Speaker Nancy Pelosi, D-Calif., reaches out to the bill’s two lead spon­sors, Rep. Bar­ney Frank, D-Mass., left, and Sen. Christo­pher Dodd, D-Conn., af­ter its pas­sage Thurs­day.

Con­tin­ued from A “There will be no more tax­payer-funded bailouts, pe­riod.”

The law will give the govern­ment new pow­ers to break up com­pa­nies that threaten the econ­omy, cre­ate a new agency to guard con­sumers in their fi­nan­cial trans­ac­tions and shine a light into shad­owy fi­nan­cial mar­kets that es­caped the over­sight of reg­u­la­tors. The vote came on the same day that Gold­man Sachs & Co. agreed to pay a record $550 mil­lion to set­tle charges that it misled buy­ers of mort­gage-re­lated in­vest­ments.

From store­front pay­day len­ders to the biggest bank­ing and in­vest­ment houses on Wall Street, few play­ers in the fi­nan­cial world are im­mune to the bill’s reach. Con­sumer and in­vestor trans­ac­tions, whether sim­ple debit card swipes or the most com­plex se­cu­ri­ties trades, face new safe­guards or re­stric­tions.

A pow­er­ful coun­cil of reg­u­la­tors would be on the look­out for risks across the fi­nance sys­tem. Large, fail­ing fi­nan­cial in­sti­tu­tions would be liq­ui­dated and the costs as­sessed on their sur­viv­ing peers. The Fed­eral Re­serve is get­ting new pow­ers while fall­ing un­der greater con­gres­sional scru­tiny.

The bill would cre­ate a Con­sumer Fi­nan­cial Pro­tec­tion Bureau em­pow­ered to write and en­force reg­u­la­tions on mort­gages, credit cards and other fi­nan­cial prod­ucts. Len­ders face new re­stric­tions on the type of mort­gages they write and couldn’t be re­warded for steer­ing bor­row­ers to high­er­cost loans.

Bor­row­ers are to be pro­tected from hid­den fees and abu­sive terms, but they will have to pro­vide ev­i­dence that they can re­pay their loans, thus halt­ing the no-doc­u­ment loans that had flooded the mar­kets.

The sweep­ing, 2,300-page leg­is­la­tion might carry po­lit­i­cal risks for Democrats, who hope to build this fall’s midterm elec­tion cam­paign on their tough crack­down on Wall Street.

Just as with health care re­form, Repub­li­cans have por­trayed the fi­nan­cial over­haul as a dan­ger­ous in­tru­sion of big govern­ment into the lives of av­er­age Amer­i­cans.

Rather than end­ing bailouts, Repub­li­can op­po­nents charge the govern­ment’s new power to dis­man­tle large fi­nan­cial com­pa­nies on the brink of col­lapse would lead to more bailouts at tax­payer ex­pense.

Only three Repub­li­cans — Sens. Scott Brown of Mas­sachusetts and Su­san Collins and Olympia Snowe, both of Maine — voted for the bill. They pro­vided the piv­otal votes needed to reach the 60 sen­a­tors re­quired to cut off de­bate in a key pro­ce­dural vote ear­lier Thurs­day, over­com­ing a threat­ened GOP fil­i­buster.

One Demo­crat, Sen. Russ Fein­gold of Wis­con­sin, voted against the leg­is­la­tion, say­ing it wasn’t tough enough on the fi­nan­cial in­dus­try.

Sen. John Cornyn, R-Texas, said, “The Dodd-Frank bill fails to ad­dress the root cause of our cur­rent eco­nomic cri­sis and does not in­clude many re­forms needed to pre­vent an­other fi­nan­cial cri­sis.” He and Sen. Kay Bai­ley Hutchi­son, RTexas, voted against it.

But Rep. Lloyd Doggett, DAustin, praised the Se­nate pas­sage of the bill, which was al­ready ap­proved by the House. “To­day rep­re­sents sig­nif­i­cant progress in putting power back in the hands of Cen­tral Texas fam­i­lies and in pre­vent­ing bank bailouts that I have con­sis­tently op­posed,” he said.

Even be­fore the bill passed Thurs­day, House Mi­nor­ity Leader John Boehner, R-Ohio, called for its re­peal.

“I think it’s go­ing to make credit harder for the Amer­i­can peo­ple to get, clearly harder for busi­nesses to get,” Boehner said.

The leg­is­la­tion will re­verse three decades of dereg­u­la­tion through­out the fi­nan­cial sys­tem, which many ex­perts say set the stage for the fi­nan­cial cri­sis in 2008.

To pre­vent a re­peat, the bill en­acts the most sweep­ing clam­p­down on the in­dus­try since the cre­ation of the Se­cu­ri­ties and Ex­change Com­mis­sion and the Fed­eral De­posit In­surance Corp. in the 1930s.

To help pay the $19 bil­lion cost of the leg­is­la­tion’s ex­panded reg­u­la­tion over the next 10 years, the leg­is­la­tion im­me­di­ately ends any ad­di­tional ex­pen­di­tures from the con­tro­ver­sial $700 bil­lion Trou­bled As­set Re­lief Pro­gram bailout fund. TARP was to ex­pire in Oc­to­ber.

Se­nate Bank­ing Com­mit­tee Chair­man Christo­pher Dodd, D-Conn., said the leg­is­la­tion can’t fix the fall­out from the re­cent cri­sis but aims to give reg­u­la­tors the abil­ity to pre­vent an­other one.

“I re­gret I can­not give you your job back, put re­tire­ment money back in your ac­count,” he said. “What I can do is see to it that we never, ever again have to go through what this nation has been through.”

The leg­is­la­tion is called the Dodd-Frank bill af­ter him and House Fi­nan­cial Ser­vices Com­mit­tee Chair­man Bar­ney Frank, D-Mass., who were the lead spon­sors. Once it is signed into law, reg­u­la­tory agen­cies will be­gin writ­ing thou­sands of spe­cific new reg­u­la­tions and con­duct­ing dozens of stud­ies.

Repub­li­cans have por­trayed them­selves as the pro­tec­tors of Main Street, par­tic­u­larly small busi­nesses that they said would be harmed by new con­sumer pro­tec­tions and would lose ac­cess to credit from banks squeezed by the leg­is­la­tion.

“It’s just this kind of un­cer­tainty that will de­ter lend­ing and freeze up credit,” said Se­nate Mi­nor­ity Leader Mitch McCon­nell, R-Ky., who com­plained the leg­is­la­tion will cre­ate a “vast new un­ac­count­able bu­reau­cracy” that will im­pose oner­ous new reg­u­la­tions on strug­gling busi­nesses.

But Se­nate Ma­jor­ity Leader Harry Reid, D-Nev., said the leg­is­la­tion would crack down on risky Wall Street prac­tices that helped trig­ger the re­ces­sion. And vot­ers, par­tic­u­larly in hard-hit states such as his, will re­ward Democrats for mak­ing the re­forms, he said.

“This is go­ing to be a tremen­dous plus in the elec­tions,” Reid said.

Barack Obama

alex Bran­don

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