Congress is on the verge of passing the most sweeping banking and financial regulations since the 1930s – or so the catch phrase goes.
At the same time many say the reform bill does not go far enough to regulate Wall Street and curb the chances of another financial meltdown like the one in September 2008.
Sound like déjà vu? Such a debate sounds similar to the wrangling around health care reform.
“Well one reason it’s being hailed as the most sweeping regulations since the 1930s is there hasn’t been any new regulations implemented on capital for 30-plus years,” charged Scott Marshall, head of the Communist Party’s labor and union work. “For most of the population, we have spent our lives under the era of deregulation, which directly led to the current economic crisis.”
Marshall said the fight on Wall Street reform is like the fight on health care reform. “Not enough for the people, but as much as the people could win, given the corporate and far-right’s attack on the role of government and where Congress and the country is at politically.”
On June 25, after 20 hours of straight negotiations, the House and Senate Joint Committee agreed on the details of a combined financial reform bill, which President Obama says has in it 90 percent of what he wanted. The joint bill goes back to each chamber for a vote, expected sometime this week.
With the death of Democrat Sen. Robert Byrd of West Virginia, it may be tougher to pass the reconciled bill in the Senate and get it to the president’s desk for a July 4 signing.
Republican Sen. Scott Brown from Massachusetts, who was one of the four Republicans who voted for the original Senate bill in May, says he won’t go for the joint bill because it includes a fee on banks. The bank fee would raise $19 billion to offset the cost of the bill, pay down the national debt and guarantee no more taxpayer bailouts. Brown says it’s a “tax increase.”
Two Democrats, Sens. Maria Cantwell of Washington State and Russ Feingold of Wisconsin, voted against the previous Senate bill since, they said, it did not go far enough. They, like other critics, say the bill doesn’t break up the Big Banks, and thereby the “too big to fail” scenario can be repeated.
Some of the features of the House-Senate bill include:
- A new consumer protections agency, housed under the Federal Reserve, would put new scrutiny on numerous financial institutions, including pay day lenders, check cashers; FDIC increases insurance level to $250,000; no more hidden credit card or mortgage fees, buried in pages of fine print.
- Regulation and transparency of the shadowy derivatives and credit markets. Derivatives would be traded out in the open with some regulatory oversight like record-keeping and reporting; hedge funds must register with regulators.
- Outlawing predatory loan practices, which led to the crash of the housing bubble, and the biggest shift of wealth out of the African American and Latino communities, and working-class communities overall, to the big banks.
Many sought to make regulatory control outside of the Federal Reserve, which is run by the bankers themselves. But the Fed maintains its regulator role over thousands of community banks and complex financial companies. However, the bill eliminates the role of bankers in picking presidents at the Fed’s 12 regional banks.
Another compromise was the implementation of the so-called “Volker Rule,” named after President Carter’s former Treasury Secretary Paul Volker. Instead of separating commercial banks from owning and operating hedge funds and private equity – the banking industry got a concession so banks can invest up to 3 percent of their core capital in such funds. But government regulators may seize and break up troubled financial firms whose collapse whose collapse might cause widespread damage.
Marshall said a transaction tax on big banks and Wall Street firms is necessary to get the “real” economy going again and create jobs. “Part of the sweeping reforms of the 1930s was a stock transfer tax, which was repealed in the 1950s. That was the opening guns of shifting the tax burdens from the corporate and super-wealthy elite to small business, middle-class and working people. Such a wealth shift continued to this day, like in the form of the Bush tax cuts.”
A coalition of U.S. unions, civil rights and community groups, called Jobs For America Now, are demanding such a tax be levied to create necessary and good-paying “green jobs,” rebuild the infrastructure and prevent layoffs of teachers and other public workers.
A global transaction tax proposal was recently floated by Germany Prime Minister Angela Merkel at the recent G-8 meet, which rejected the idea. The UK instituted such a tax, three years ago. The European Union may pursue such a tax on its own.