On Thursday, the US Senate passed a financial reform package that includes a handful of important reforms, but it won’t fundamentally change the relationship between banks and society. Wall Street still has a vise grip on our economy, and lawmakers still find it very difficult to stand up to bigwig financiers.
The real fight for our economy will involve future legislative battles with bankers. Winning those battles will require sweeping action by engaged citizens. The good news is, critical progressive mobilization is already happening. Public outcry helped fuel the fire for Senate reform. Representative Barney Frank has said that the Wall Street reform bill he pushed through the House last year would have been much stronger in today’s atmosphere of outspoken economic unrest.
Focus on the Fed
So what’s good about the bill the Senate just passed? As Annie Lowrey explains on The Washington Independent, the Federal Reserve’s emergency lending programs will finally be subjected to public scrutiny.
The Fed served as the US government’s chief bailout engine during the crisis. It injected trillions of dollars into the banking system without any oversight. We still don’t know who got the vast majority of that money, or what collateral the Fed accepted in return. There are all sorts of potential scandals, ranging from sweetheart deals the Fed cut with hedge funds to the trillions of dollars in loans to megabanks with no strings attached.
Of particular interest are the "Maiden Lane vehicles"—programs the Fed devised to purchase or guarantee assets from Bear Stearns and AIG. These were explicit bailouts for individual firms. We know almost nothing about the Bear Stearns bailout, and what little we do know about the AIG bailout is unsavory to say the least—big bonuses for AIG’s employees, with little or no effort to limit the impact on taxpayers.
There are still a handful of important fights as the House and Senate iron out the differences between their respective versions of the bill. As I emphasize on AlterNet, a host of major issues are still on the table, including consumer protection rules and fixing the derivatives casino. These changes could be gutted entirely or dramatically strengthened during negotiations between the House and Senate.
The final bill will not dramatically alter Wall Street. As Roger Bybee explains for In These Times, the Democratic leadership has been trying to both establish meaningful reforms and simultaneously maintain its campaign finance relationship with megabanks. Republicans have almost universally attempted to block any reform altogether.