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.