Copies of the “American Financial Stability Act of 2010” summary and legislation are out, as well as a transcript of Chairman Dodd’s prepared statement. And he seems to have picked up some important support: Elizabeth Warren, the brainchild behind the Consumer Financial Protection Agency and a key progressive on financial regulation.
In a statement, Warren notes:
“Since bringing our economy to the brink of collapse, Wall Street has spent more than a year and hundreds of millions of dollars in an all-out effort to block financial reform. Despite the banks’ ferocious lobbying for business as usual, Chairman Dodd took an important step today by advancing new laws to prevent the next crisis. We’re now heading toward a series of votes in which the choice will be clear: families or banks.”
That sounds like a cautious endorsement. A source close to Warren notes she is concerned that the new watchdog’s enforcement powers may not be vigorous enough and that there are several provisions, such as one governing the treatment of non-banks, which need strengthening. The CFPA debate will continue.
For Dodd’s purposes, it’s much better for him to have Warren on board early, rather than the opposite. But she won’t quietly give up on her efforts to push the CFPA in a stronger direction.
UPDATE: Sen. Sherrod Brown also goes the cautious optimism route in his statement. Brown sits on the Banking Committee.
“Wall Street banks – and some of their allies on Capitol Hill – are intent on blocking meaningful reform. They’ll attempt to slow-walk the bill, water it down, or kill it through delay. After months of discussion, Chairman Dodd is right to press forward. For the past decade, Ohioans have been ripped off by predatory lenders and whole neighborhoods have been hollowed out. It is past time to act.
“It is clear we need an independent consumer protection agency with robust authority to prevent shady practices. We need to prevent future taxpayer bailouts by ensuring one bank cannot trigger the collapse of our financial system. We need to fix our credit rating agencies – which fell asleep on the job and let Wall Street peddle junk investments. And we need to get tough on banks that use risky financial instruments that jeopardize our financial system. These financial ‘weapons of mass destruction’ should be treated as such.
“Special interests will fight tooth and nail against real financial reform. If they win, middle class taxpayers lose.”
You can see which elements Brown will make the focus in his efforts on the bill.
UPDATE II: Obama’s statement is interesting for what he focuses on, particularly the carve-out exemptions from regulation by the CFPA for auto dealers, payday lenders, and the like. The Administration strongly opposed the auto dealer exemption in the House, but it made its way into the bill anyway.
American families deserve a strong, independent consumer financial protection agency that is accountable for setting and enforcing clear rules across the financial marketplace. And I will not accept attempts to undermine the independence of the consumer protection agency, or to exclude from its purview banks, credit card companies or nonbank firms such as debt collectors, credit bureaus, payday lenders or auto dealers.
I will oppose any loopholes that could harm consumers or investors, or that allow institutions to avoid oversight that is important to financial stability.
We need to ensure the ultimate bill provides strong, clear authority for setting and enforcing rules, limiting excessive risk taking in the financial system, and winding down the largest financial firms when necessary in a way that does not cause a financial panic. All derivatives must be regulated and shareholders should have a say not just on pay but also other compensation that rewards risk taking. We will stand firm against any attempt by the financial sector to avoid their responsibilities: in any future crisis the big financial companies must pay, not taxpayers.
UPDATE III: Jeff Merkley:
“The Restoring American Financial Stability Act is a significant stride towards a stronger financial system and I look forward to working with Senator Dodd and my colleagues to produce a bill that addresses several important challenges: ending ‘too big to fail’, getting risky investing out of the banks that families and business owners depend on, and protecting consumers from abuses.”