Video Summary
Bill Statistics
The Middle Class Position
The middle class supports.
How They Voted
51% with middle class
47% against middle class
2% did not vote
Grades
House
The House receives a grade of C for its support of the middle class on this piece of legislation.
222 Representatives voted for the middle-class position; 202 voted against.
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See how each member voted on this bill:
(H.R. 4173) On passage of legislation designed to prevent the kind of major financial crisis that had recently occurred, and to implement the most significant regulatory reform of the financial industry since the Great Depression
in
- Consumers
- Corporate Accountability
- Corporate bankruptcy
- Corporate taxes
- Credit cards
- Debt & Bankruptcy
- Deceptive advertising and marketing
- Executive compensation
- Financial literacy
- Government Accountability
- Housing
- Mortgage lending
- Payday loans
- Personal bankruptcy
- Refund Anticipation Loans
- Shareholder rights
- Student loans
- Tax Fairness
Introduced:
12.02.2009 [House]
12.02.2009 [House]
Sponsor:
[-]
[-]
Signed into Law: 07.21.2010
2009 House Roll Call #968:
Yea-223, Nay-202
The Legislation:
This was a vote on passage of legislation designed to prevent the kind of major financial crisis that had recently occurred, and to implement the most significant regulatory reform of the financial industry since the Great Depression.
Among other things, the bill created a new Consumer Financial Protection Agency, strengthened the enforcement abilities of the Federal Trade Commission, included provisions intended to end the potential of federal bailouts to institutions that are “too big to fail", gave shareholders an advisory vote in executive compensation, strengthened the SEC's powers, initiated regulation of sensitive financial instruments known as “derivatives, toughened anti-predatory lending practices, imposed a higher liability standard on the rating agencies, and created a Federal Insurance Office.
Rep. Waxman (D-CA) speaking in support of the bill, referenced hearings he had chaired on the financial crisis. He said the hearings demonstrated that “government regulators were asleep at the switch while Wall Street banks drove our economy off a cliff. Change is necessary, and I believe this legislation will strengthen the federal government's ability to prevent and respond to future crises.”
Rep. Frank (D-MA) chairs the Financial Services Committee, which developed the legislation. He first said that “the lack of regulation over many years allowed big problems to grow up . . . (and this) led to the largest crisis in recent memory since the Depression.” Frank argued that the provisions in the bill impose the kinds of regulations that will not permit that situation to reoccur. He went on to claim: “The Republican proposal is . . . (D)o not interfere with the ability of an AIG, Lehman Brothers, Citicorp, Countrywide or any of those other financial entities. Do not prevent them from doing again what they did before. If and when they have done such a bad job that they are collapsing, then let them go bankrupt and don't do anything to deal with the consequences. Let's have another Lehman Brothers.”
Rep. King (R-IA) opposed the legislation. He said the difference between supporting and opposing it is “the difference between believing the federal government can regulate more aspects of our society, more aspects of our economy, and the difference in believing whether people can become and entities can become too big to be allowed to fail, or whether small businesses might be too small to be allowed to succeed. And it's about the difference between a free enterprise economy and a managed and controlled economy. It's about the difference between liberty and the difference between a socialized economy.”
Rep, Barton (R-TX), another opponent of the legislation, focused on the new Consumer Financial Protection Agency it created. He argued that the “nearly limitless power” given to the new agency by the bill is “questionable at best and tyrannical at worse.” Rep. Royce (R-CA), who also opposed the bill, focused on the powers it gave to regulators “to rescue certain companies and liquidate others . . . to pay off some creditors and counterparties and not others, and keep failed or failing companies operating and competing in the market for years.” Royce claimed “the likely outcome” will be that “larger, politically connected institutions will have the edge over their competitors.” Rep. Lucas (R-OK), another opponent, said the increased regulation it creates will discourage productive new investment.
The vote on final passage was 223-202. All 223”aye” votes were cast by Democrats, including a majority of the most progressive Members. Twenty-seven other Democrats joined all one hundred and seventy-five Republicans and voted “nay”. As a result, the bill implementing the most significant regulatory reform of the financial industry since the Great Depression passed the House and was sent on to the Senate.
The Middle-Class Position:
Middle Class Supports. The economic and financial crisis has demonstrated that the current financial regulatory system permits banks, mortgage brokers and servicers, and other firms to enrich themselves at the expense of ordinary Americans. Abusive and fraudulent mortgages sold to unsuspecting homeowners fueled the housing crisis while credit card companies used deceptive billing practices to mire cardholders in debt. The federal government leaped into action to assist the financial services industry when firms like AIG, Morgan Stanley, and Citigroup were at risk. The $700 billion TARP program and trillions of dollars more in cheap loans and guarantees have nurtured the financial services sector back to health, profits, and gigantic compensation packages. Meanwhile, middle-class Americans continue to face foreclosure and abusive lending and credit card practices in addition to extended bouts of unemployment.
The Wall Street Reform and Consumer Protection Act’s creation of a Consumer Financial Protection Agency is a critical innovation to protect ordinary Americans from deceptive and abusive lending practices. While consumers are currently guarded from faulty products like toasters, no single agency is tasked with overseeing the financial products and services – from credit cards to mortgages and student loans – that Americans rely on every day to earn a middle-class standard of living. The CFPA will be empowered to root out products and services that are harmful to aspiring middle-class and middle-class Americans. It will promote equal access to safe credit products and root out harmful ones like certain subprime mortgages, abusive credit card practices, and usurious payday loans. The Agency is critical to making the financial services sector work for ordinary Americans. The Mortgage Reform and Anti-Predatory Lending Act, which is included in the bill, also takes important steps to combat and end the abusive lending practices at the root of the financial crisis.
The legislation’s increased regulation of executive compensation, improved protections for investors, and expanded oversight of derivatives all address factors – compensation structures that encouraged excessive risk taking, fraudulent investment practices like Bernard Madoff’s Ponzi scheme, and opaque derivatives contracts – that contributed to the financial crisis. These steps will help ensure that similar practices do not precipitate another crisis.
The Financial Services Oversight Council, the regulatory powers granted to the Council, and the dissolution authority included in the legislation make the development of a financial threat into an agent of financial and economic destabilization less likely. By regularizing a process for oversight of financial markets and creating a mechanism for regulators to impose capital, leverage, and other standards on at-risk firms, the legislation significantly enhances the federal government’s capacity to stem an outbreak of instability before it begins. Most importantly for middle-class Americans, this process and the dissolution authority created by the legislation rely on assessments of the largest financial firms for funding. Thus, if future bailouts become necessary, they are much less likely to use taxpayer dollars.
From the Experts:
“[T]he U.S. House of Representatives has taken an important step toward restoring our country's financial stability by voting to pass the Wall Street Reform and Consumer Protection Act of 2009 (H.R. 4173). The bill would provide consumers with significant protections from the industry practices that dismantled our economy and those of countries around the world…Meaningful regulatory reform requires a strong, independent CFPA that can set commonsense standards in the financial services arena. Any reform must also restore states' ability to identify and stamp out problems locally before they become national.”
–Michael Calhoun, President, Center for Responsible Lending (December 11, 2009)
“[T]he House of Representatives took an important step forward in protecting the wallets of all Americans from unscrupulous and abusive lending and banking practices. The Chamber of Commerce, the big banks, and the most unscrupulous bottom feeding lenders spent hundreds of millions of dollars to try to defeat any progress, but reform is moving ahead despite them. We need to do more, but the passage of these reforms helps create a path back to jobs and economic growth...”
–Heather Booth, Director, Americans for Financial Reform (December 11, 2009)
Beyond this Bill:
Though the Wall Street Reform and Consumer Protection Act includes provisions, particularly the Consumer Financial Protection Agency, that substantially benefit consumers by reducing the abuses of the financial services industry, the bill was significantly watered down from its original form and, as Americans for Financial Form points out, several provisions should be revised by the Senate. Originally, the legislation would have empowered the CFPA to identify “vanilla” mortgages, credit cards, and other financial products that firms would have to offer their customers. These standardized products would be those that the CFPA deemed to be best suited to the needs of consumers, not to banks’ bottom lines. The provision was not included in the final legislation. A provision allowing the CFPA’s rules to preempt stronger state regulations is particularly worrisome. Though decisions about preemption will be made on a case-by-case basis, we fear that financial institutions will be able to significantly influence the process, leaving consumers at risk from weaker national laws not adapted to local conditions. Not permitting the CFPA to oversee the Community Reinvestment Act (CRA), which ensures equitable lending to underserved communities, is a further defect: the CFPA’s mission to ensure equitable access to loan products makes it the natural home for CRA oversight. Additionally, regulations regarding derivatives and oversight of credit rating agencies and private pools of capital are not strict enough and will allow many financial practices to remain unregulated. Finally, an amendment to the bill would have allowed bankruptcy judges to reduce the mortgage principal of primary residences, a practice that is currently prohibited. This would have significantly improved the legislation by helping more than a million families save their homes from foreclosure.
The Wall Street Reform and Consumer Protection Act reduces the risk of future financial instability and makes taxpayer-funded bailouts of large financial institutions less likely. However, the bill codifies into law a financial system that is always on the brink of disaster. Rather than imposing strict rules to reduce the size and limit the function of financial institutions, the legislation relies on federal regulators to intervene only after they detect threats to stability.
