Following the contentious health care debate, there was no doubting that President Obama and the Democratic leadership would seek a different approach to the passing of the proposed Wall Street reform package. Due to the initial framing of the proposed bill as a “bailout” by misinformed/cynical Republicans and pundits, it became necessary for The President to take direct control of the message before those looking to derail reform got any further traction. He immediately made the facts of the bill the story, not the opposition, and by doing so forced Senate Republicans, who in many ways had helped write the bill, to return to negotiations and admit their rhetoric was misguided. Sen. Bob Corker, R-Tennessee said it best when he stated on the floor of the Senate: "The fact is, the bill has taken a partisan turn. There are some bipartisan solutions in this bill, I grant that. But there's still work to be done," Corker said. "Let's finish that work before it gets to the floor. Let's just finish what we started."
However, as a beneficiary of campaign funding from embattled Wall Street firms, such as Goldman Sachs ($994,795 in 2008), President Obama must walk a tight rope when criticizing those who are responsible for some of the worst practices against consumers of investment products. He knows that during his 2008 campaign he received money that was indirectly tied to the very derivatives market which he now intends to regulate. So, in framing the reasoning for the passing of this bill, he has chosen to make the argument that the proposed regulations will encourage firms to take a look at their worst practices, fix them, and work within an ethical, responsible, and increasingly consumer friendly framework. Therefore, the details of the bill, and The President’s ability to sell its contents, are of the utmost importance to his ability to knock down false attacks on both the reforms he seeks and his true intentions in pursuing them.
The Wall Street Reform and Consumer Protection Act of 2009, as written in H.R. 4173, outlines new commissions and regulations for the following areas: 1) Creates the Consumer Financial Protection Agency (CFPA), a new, independent federal agency solely devoted to protecting Americans from unfair and abusive financial products and services, 2) Creates the Financial Stability Council to identify and regulate financial firms that are so large, interconnected, or risky that their collapse would put the entire financial system at risk, 3) Ends “too big to fail” by establishing an orderly process for dismantling large, failing financial institutions like AIG or Lehman Brothers, 4) Establishes “Say on Pay” by giving shareholders a an advisory vote on pay practices including executive compensation and golden parachutes, 5) Strengthens the SEC’s powers so that it can better protect investors and regulate the nation’s securities markets (response to Madoff and Stanford frauds), 6) Regulation of Derivatives: the bill regulates, for the first time ever, the over-the-counter (OTC) derivatives marketplace.7) Establishes a simple standard for all home loans institutions: They must ensure that borrowers can repay the loans they are sold, 8) Reforms Credit Rating Agencies by addressing the role of credit rating agencies in the economic crisis, 9) Requires almost all hedge fund advisers to register with the SEC, and subjects them to systemic risk regulation by the Financial Stability regulator, and 10) Creates a Federal Insurance Office that will monitor all aspects of the insurance industry.
By touting these bipartisan reforms, President Obama should have no problem selling this bill to a public which is fed up with Wall Street betting on their futures. The regulation of the derivatives and hedge fund markets are long overdue. Advisors should be registered with the SEC, and the SEC must have the power to stop the worst practices of financial criminals such as Bernie Madoff and others. With the wind behind his back on the issue, and Republicans in a position which should ultimately force them onboard, there is no reason to expect less than 65 votes for this version of the bill. Senate Republicans, who wrote the 50 billion dollar bank funded side account for responsible deconstruction of failing institutions into the bill, must only look to their leadership for the answers as to why they are against these common sense reforms. The Senate will now debate the intricacies of the bill, and there will be numerous attempts by Republicans, as I mentioned in a previous article, to change the topic or distort the details of the bill in order to prevent a legislative victory for The President. Unfortunately, these deceitful and cynical stall tactics are fresh in all of our minds, and this time Republicans and others who choose the path of “No” do so against the clear will of the American public they so adamantly wish to serve.
In the end, despite his deep ties to the firms he wishes to regulate, President Obama can only be commended for pushing the ball back into the people’s court, and going forward with regulations against the most powerful lobbying forces on Wall Street and in the banking industry. His tight rope walk between his political future and the future of our economic systems are becoming historic in nature. And as for the Republicans, will they eventually support a bill they largely wrote themselves? We’ll have to wait and see. In the meantime, the debate in the Senate should once again be contentious.
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