The U.S. House has voted for legislation that is described as "financial services reform."
But most of the "reforms" are so mild that the savviest of the nation's big bankers will be breathing sighs of relief, rather than worrying about being regulated into good behavior.
That's not to say that the House bill is meaningless. It proposes some valuable shifts, including the creation of a Consumer Financial Protection Agency that could – if infused with proper authority and backed by a White House and Congress that want to tip the regulatory balance in favor of the great mass of Americans – give bankers and speculators some headaches.
Unfortunately, that's a vague promise rather than a firm one.
Congressman Barney Frank, the Massachusetts Democrat who crafted the measure, declared Friday that, "We have a set of rules in place that will allow the most productive parts of the free market economy, and particularly the financial system, to play the role they should play, but with much less chance of abuse."
Up to a point, this is true. The legislation, which passed on a 223-202 vote (with all Republicans and 27 Democrats opposing), does sketch the rough outlines for real reform.
The problem is that the details are so sketchy that bank and insurnace company lobbyists have plenty of openings to game the system in their favor. And they could get even more as the Senate weighs reforms and then what are expected to be very different measures are reconciled, reviewed again by both chambers and sent to desk of a president whose administration has expressed discomfort with pieces of the House bill.
In other words, while there were those who claimed on Friday that the House had enacted "the biggest change in oversight of Wall Street since the Great Depression" and that "this bill puts the referees back on the field," the big banks aren't going to get sidelined -- let alone broken up -- anytime soon.
That weakness caused some of the House's most serious backers of banking reform -- including Ohio Democrats Marcy Kaptur and Dennis Kucinich -- to oppose what they saw as an insufficient initiative. "Although I am supportive of the Consumer Financial Protection Agency as well as other provisions in the bill," Kucinich explained, "ultimately I do not think this bill adequately addresses the causes of the financial crisis, and I do not believe the reforms are sufficient to prevent another financial crisis from occurring." Many other Democrats who knew the bill was flawed swallowed hard and votes for it because they saw it as opposing a framework for constraining at least some abuses by bankers and speculators.
On the plus side, as The New York Times notes:
The bill would create, at a cost that could run into the billions, a Consumer Financial Protection Agency in an attempt to head off the kinds of lending practices that led many homeowners to take on mortgages they could not afford.
The bill would bring regulation for the first time to a portion of the over-the-counter market for derivatives. It would create a process for dealing with troubles at very large financial institutions that might pose a risk to the financial system and the economy, and require large firms to contribute to a fund to help with an orderly dissolution of those institutions if they are in danger of failing.
And the bill includes a number of other provisions to address executive compensation, investor protections and regulation of hedge funds.
On the negative side, the House legislation fails to dismantle even the biggest of "too big to fail" firms that could still collapse the U.S. economy. It also fails to even address the most serious abuses of the world's $600 trillion derivatives market.
Why is the House bill so disappointing?
Of course, Republican opposition was a factor.
But the biggest frustration was the Democratic block that tried, at every turn, to defend the big banks and speculators.
Although he had plenty of competition from the likes of Illinois Democrat Melissa Bean (who sought at one point to roll back existing protections for consumers), the the worst player was Idaho Democrat Walter Minnick.
Minnick tried to gut consumer protections in the House legislation by blocking creation of a potentially-powerful Consumer Financial Protection Agency, which would have the authority to regulate everything from mortgages to credit card rates.
Specifically, Minnick proposed an amendment to replace real regulation with a maintain-the-status-quo "council of regulators. (The Idaho Democrat was spectacularly wrong, as Consumers Union President Jim Guest explained: "Consumers have paid a very steep price for years of weak federal oversight of unscrupulous banking and lending practices. It's time for Congress to put an end to do-nothing financial industry oversight and make sure that consumers have a real watchdog looking out for their interests.")
The key vote on financial services reform in the House was on the Minnick amendment, which was easily one of the most anti-consumer measures ever proposed by a Democratic member of the House.
One hundred and seventy five Republicans voted for the Minnick amendment, while none opposed it. No surprise there; while the Republican Party once was in the forefront of advancing consumer protections and smart business reforms, it is for the remainder of this session merely a "Party of No."
Joining the Republican backers of the move to gut the consumer protections were 33 Democrats. Most were southern and western "Blue Dogs" whose philosophy might best be described as: Even a little reform is too much if it makes the bankers unhappy.
They needn't worry too much.
While the House has acted, America is still a long way from "even a little reform."