Sweeping financial reforms were passed by the Senate Banking Committee this evening, paving the way for the reform bill to be taken up on the floor of the Senate later this year. The Committee, chaired by Democrat Christopher Dodd of Connecticut, passed the reforms by a vote of 13-10, strictly along party lines.
After the passage of the bill President Obama was quoted as saying, “We are now one step closer to passing real financial reform that will bring oversight and accountability to our financial system and help ensure that the American taxpayer never again pays the price for the irresponsibility of our largest banks and financial institutions.”
In a dramatic turnaround that hastened the bill’s passage, Republicans withdrew the 200-plus amendments to the bill that they had filed; according to reports this was because “it became clear that all their measures would fail.” If passed the bill will be known as the “Restoring American Financial Stability Act of 2010” – however President Obama may have months to wait before that point is reached.
The House passed its own version of the financial reform bill last December; even if the Senate bill overcomes the filibuster that Republicans are likely to employ to deny Democrats an election-year victory, both bills will have to be combined into a single proposal which will then have to pass in both houses of Congress.
The stated purpose of the reform bill is to promote the financial stability of the United States by improving accountability and transparency in the financial system, ending the need for bailouts based on the “too big to fail” argument, to protect the American taxpayer by ending bailouts and to protect consumers from abusive financial services practices.
The keystone in the reform framework is Mr. Obama’s promise to create a Consumer Financial Protection Agency to avoid some of the risks that precipitated the credit crisis of 2008. However this proposal has been attacked by Republicans as creating further bureaucracy; the financial industry has also lobbied against it.
Yet the administration looks likely to push hard to get the bill through Congress. At a speech made earlier Treasury Secretary Tim Geithner said, “The test we face is whether we enact real reforms that provide strong protection for consumers, strong constraints on risk taking by large institutions and strong tools to protect the economy and tax payers from future crises. We will not accept a Bill that does not meet that test.”
The bill is one of the most the most large-scale extensions of comprehensive regulation in recent times as it tightens the governments control over banks (including within the federal banking system), derivatives trading, hedge funds and insurance.
Touching upon the need for resolve in getting the financial reform bill passed Mr. Obama in his weekly address said, “I urge those in the Senate who support these reforms to remain strong, to resist the pressure from those who would preserve the status quo… I promise to use every tool at my disposal to see these reforms enacted.”
