Senate Financial Reform Bill Makes Good Headway But Should Be Stronger

For Immediate Release

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Senate Financial Reform Bill Makes Good Headway But Should Be Stronger

Statement of Robert Weissman, President of Public Citizen

WASHINGTON - The Senate bill contains several strong, positive elements – among
them, the creation of a Consumer Financial Protection Bureau,
restrictions on “swipe fees” at the cash register, useful regulation of
credit rating agencies and an audit of the Federal Reserve – and we
welcome its passage.

But after all the damage inflicted by Wall Street, the bill should
be much stronger. Even though it plunged the nation into the worst
recession since the Great Depression, Wall Street has enough power on
Capitol Hill to thwart reforms that would prevent it from doing the
same all over again.

The bill leaves the mega-banks intact, so that they will continue to
maintain a vise grip over the financial system, the economy and our
democracy. And the bill fails to clamp down sufficiently on the casino
economy.
 
Importantly, however, the bill does contain significant derivatives
reform language from U.S. Sen. Blanche Lincoln (D-Ark.). By forcing
derivatives trading out of the shadows, the Lincoln provision would –
with one vital fix – significantly reform a sector with major
responsibility for the financial crisis. The strong derivatives
regulation contains one major, accidental loophole – no enforcement –
that must be remedied in conference. The Lincoln provisions would also
force commercial banks out of the derivatives speculation business, an
important step to redirect banks to provide credit to Main Street,
rather than engage in speculative betting.
 
A vital measure of the ultimate significance of the Senate action is
whether the derivatives reform measures can be protected from the swarm
of Wall Street lobbyists who will seek to eliminate, eviscerate, defang
or otherwise undermine the measures’ purpose and effect.

This legislation is not the end of the Wall Street reform effort.
Just as there were multiple rounds of reform in the 1930s, we should
look now to further reform efforts, fueled by more revelations about
conflicts of interest, self-dealing, deception and fraud.

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Public Citizen is a national, nonprofit consumer advocacy organization founded in 1971 to represent consumer interests in Congress, the executive branch and the courts.

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