Last week, the Senate passed a bill on banking and Wall Street reform. The bill, expected to be signed into law this week by President Obama, would create a regulatory body with the power to institute reforms for banks and financial firms to help prevent a recurrence of the financial crisis faced by many banks in 2008. In particular the law will create the Consumer Financial Protection Bureau inside of the Federal Reserve. This new bureau will have the power to create new rules protecting consumers from unfair practices by credit card and mortgage companies. It will also set up new regulators who have the power to more closely monitor the cash banks have on hand and large financial firms that are on the verge of collapsing. Ideally this would prevent multiple firms failing because of the ill health of one. (source – cnn.com)
The senators from Georgia, Saxby Chambliss and Johnny Isakson, both voted against the bill. (Source – ap.org) Both senators felt that the bill fell far short of what it needed to do. Sen. Chambliss expressed concern that the bill falls short of holding those responsible for issues accountable and that it creates another huge government bureaucracy. He also feels that the bill is overreaching in its attempt at creating greater transparency.
Senator Isaskson attacked the bill on the grounds that it does not cover all financial institutions. In a quote from the Gwinnet Daily News, ““This rush to judgment on the financial regulatory bill is wrong. It is wrong because it excludes Freddie Mac and Fannie Mae from any scrutiny or increased regulation,” Isakson said on the Senate floor. “It is critical that we have all the players under scrutiny and all the players under regulation, not just trying to create a feel-good system where we reregulate those who are already regulated, saying we are doing something about the conditions in the market when, in fact, we are raising the cost of doing business, lowering the ability for banks and lending institutions to extend capital and, in fact, in some ways contributing to a continuation of the recession we experience today in America.” (Source – Gwinnet Daily News)
The honorable senators from Georgia are not the only ones concerned over the bill’s potential impact. Some worry that certain aspects of the bill, like clamping down on speculation, will not fix the issue of wide price swings. In an article in CNN-Money, a University of Illinois agricultural marketing professor Scott Irwin feels that speculation helps companies hedge risk and stabilize their prices. Some also speculate that while the regulators work on the new rules for banks, lending institutions will be cautious and the economy will lag. (Source – cnn.com)
What do you think of these changes? Is more regulation needed or would it be better to ensure current regulations are properly followed? What do you think of the bill excluding Freddie Mac and Fannie Mae from its reach?