With passage of the Wall Street Reform and Consumer Protection Act of 2009, the U.S. House of Representatives today takes an important first step in reregulating the financial sector.
Most importantly, the bill creates a powerful financial consumer watchdog agency. Had the Consumer Financial Protection Agency existed during the go-go years earlier this decade, it could have prevented millions of consumers from being ripped off – and protected the banks from themselves. The financial crisis would have been significantly less severe.
It also contains some modestly beneficial provisions in investor protection, establishing liability for credit ratings firms, regulating derivatives and imposing leverage limits on the largest institutions. And it includes an important measure for a comprehensive public auditing of the Federal Reserve. But the bill doesn’t do nearly enough to rein in the Wall Street banksters and is wholly incommensurate with the devastation Wall Street has wreaked across the land.
The bill does very little to address industry structure. Wall Street and the big banks engaged in reckless betting under the belief that they were too big to fail – that they were protected by a federal backstop. The biggest banks are now bigger than they were before the crisis. The solution to the too-big-to-fail problem is to
