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Reining In Wall Street

What's New

On July 21st, President Barack Obama signed into law historic financial reform legislation.  Here are some of the key impacts of the new law.

  • Landmark consumer protection: Consumers will now have an independent advocate on their side to prevent tricks and traps related to mortgages, payday loans and checking accounts. Credit cards and mortgages will offer terms in language we can all understand.  It will also offer help for those abused by predatory lenders. The new law will limit banks from charging businesses hefty “swipe” (or interchange) fees for debit-card purchases and allow merchants to educate consumers about discounts for cash purchases.

 

  • Shining Light on Shadow Markets:  The $600 trillion derivatives market will now operate in the open, so regulators can catch problems – like the credit default swaps that brought down the economy – before they happen. Most deals will have to be backed up by a separate clearinghouse and traded on public exchanges. The participants will have to actually prove they have the money to cover their bets.

 

  • Ending the bailout era: One regulator will be in charge of watching for emerging threats to the whole financial system – and will have the tools and authority to ensure those threats are actually visible. The government will be able to break up large troubled financial firms without taxpayer bailouts.

 

  • Reining in the Wall Street Casino: Banks will be barred from gambling with taxpayer-backed money. Banks will have to separate their riskiest derivatives trading operations into affiliates and their investments in risky hedge funds will be severely limited.

 

  • Mortgage reforms: For the first time lenders are prohibited from making loans that borrowers cannot repay, and banned from receiving kickbacks for steering people into high rate loans when they qualify for lower rates.

 

  • Strong investor protections: Companies will have independent directors set executive compensation and shareholders will get a voice on those decisions. Enhanced shareholder rights will allow for a say on pay of executives and give long-term shareholders a meaningful voice in holding corporate directors accountable. Brokers will also be responsible to their clients for their advice of investments (because they’ll have the same “fiduciary responsibility” that investment advisors have always had.)

 

  • Holding Credit Rating Agencies Accountable: Credit rating agencies will no longer have a vested financial interest in giving high ratings to risky investments. Better controls will hold rating agencies accountable for the reliability of their reporting.  Investors will be able to sue credit rating agencies who slap a high rating on a risky investment.

 

  • Opens the Fed’s books: The Fed’s emergency lending programs from the financial crisis will be audited to see where the money went. The Fed will also have to disclose loans it makes to banks through its discount window.  Additionally, banks will no longer have a say in picking their rule makers – they don’t get a say in choosing the regional Fed bank presidents.

 

  • Banks Pay Up. The largest financial firms have to pay $19 billion to ensure oversight to prevent another financial crisis.

 

  • Banks have to have “skin in the game”: Banks that package loans must keep 5% of the credit risk on their balance sheets.


 

What's New

Senate Passes Historic Financial Reform 

On May 20th, the U.S. Senate passed the Restoring American Financial Stability Act, which includes a strong, independent Consumer Financial Protection Agency, opens up the shadow markets where derivatives are traded, and prevents banks from becoming ‘too big to fail.’”

CoPIRG backed the legislation and successfully fought back several attempts to weaken it on the Senate floor. The bill now moves to a conference committee, where we will continue to work for the strongest possible consumer protections.

How did your Senator vote?

CoPIRG's Senator Scorecard scores Senators on their votes on key amendments. Did they vote for Wall Street or for Main Street on the Restoring America’s Financial Security Act of 2010?

The Senator Scorecard looks at ten key amendments and the final vote, and gives each Senator a final "public interest" grade.

Click here to go to the Senator Scorecard page

What Wall Street Reform Means to You

The historic Wall Street reform legislation passed by the Senate last night will have an impact on Main Street as well as Wall Street. The big banks will make every effort to dilute the bill in the House-Senate conference. Congress must assure that nothing is done to weaken the legislation, that the strongest provisions of each bill make it into the final version and that potential loopholes are closed.

Here are the key provisions that will provide all Americans with economic stability.

• Real consumer protection: independent from the biggest banks that have put their profits ahead of us. Now credit cards and mortgages will offer terms in language we can all understand.  It will also offer help for those abused by predatory lenders.

• Mortgage reforms: For the first time lenders are prohibited from making loans that borrowers cannot repay, and banned from receiving kickbacks for steering people into high rate loans when they qualify for lower rates.

• Ending the casino economy and bringing sunlight to shadowy derivatives market: The $600 trillion derivatives market will now have the light of day shining on the market (with exchange trading) and be held accountable with capital requirements (with clearing).

• Putting the brakes on risky speculation to prevent future crises and tax payer bailouts: Unregulated shadow banks like AIG will face strict oversight for the first time and our biggest, riskiest banks will have tougher leverage and capital requirements. When a financial firm does run into trouble, it will face a new liquidation regime so that we don’t need to bail it out or prop it up—it will be put out of business.

• Strong investor protections: Enhanced shareholder rights will allow for a say on pay of executives and give long-term shareholders a meaningful voice in holding corporate directors accountable. Additionally credit ratings agencies will not be just the handmaidens of the biggest financial institutions. Better controls at rating agencies hold them accountable for the reliability of their reporting.

 



How You Can Help

Dear Senator Bennet: I am not buying the big banks’ misleading propaganda

Stand up against the banks and don’t let them get away with it. Vote for strong bank reform that forces banks to set aside THEIR money to cover the costs of their reckless behavior, not OUR money.



Overview

More than a year after Wall Street's reckless dealings triggered the worst economic crisis since the Depression, we're still waiting for Congress to enact the changes that could keep it from happening all over again.

We need a financial system that works for consumers, small investors and taxpayers while holding Wall Street bankers accountable for their bad behavior.

That's why CoPIRG is pushing for reform, so that no Wall Street firm gets too-big-to-fail, and so consumers are protected from unfair practices ranging from predatory mortgages to "gotcha" overdraft fees.

Even though the banks took billions of dollars of taxpayers money, the big banks and Wall Street are lobbying hard to block reform.

But we have a real opportunity to reform the financial system that failed.

Leading the charge is Ed Mierzwinski, our consumer program director and a 20-year Capitol Hill veteran. Whether he's making our case at Congress or on cable news, Mierzwinski is one of the strongest public interest voices on financial reform in Washington. Mierzwinski also helped found of Americans for Financial Reform, a coalition of which CoPIRG is a member.

Working with our allies, and with support of CoPIRG members, we are making progress.

In December, the House of Representatives narrowly approved the Wall Street Reform and Consumer Protection Act, despite the outcry from lobbyists representing the financial industry.

But the fight's not over. We need your help to pass a strong version of the bill in the Senate.

We're gathering support for a bill that would:

• Put consumers and taxpayers before big banks. Check irresponsible financial practices with new rules and stronger, independent enforcement. We’re supporting a new Consumer Financial Protection Agency.

• Cover all players and transactions. Rein in hedge funds and reckless investments that escaped regulations and traded without oversight on “shadow markets.” 

•  Prevent financial institutions from becoming “too big to fail.” Banks shouldn’t be able to freely gamble with taxpayer money covering the bets.

•  And we support greater oversight, accountability and democratization of the Federal Reserve.

Please take action today, by clicking here.



In Part 1 of U.S. PIRG's Reining In Wall Street Video Series, CoPIRG's Federal Consumer Program Director Ed Mierzwinski gives a history of the current financial crisis and reviews U.S. PIRG's plan of action.

News

Washington, D.C.: Consumer Groups Praise the CFPA

Washington, D.C.: U.S. PIRG Helps Launch Coalition to Clean Up Wall Street

To listen to a recording of the June 16 telephone press conference, click here.

Read more.



Resources

American Prospect Cover

Read Ed Mierzwinski’s article Regulation as Civic Empowerment in the American Prospect July/August 2009: The Credit Crisis and Working America


Read Ed Mierzwinski's Testimony Before the House Committee on Financial Services Regarding Financial Regulatory Reform (7/16/2009)

Listen to Ed Mierzwinski on American Public Radio's "Marketplace" talking about bank regulation on May 20, 2009

Consumer tips for the downturn

Read Consumer Program Director Ed Mierzwinski’s blog



Financial Reform Platform

If money to stabilize the markets was necessary, then the package passed by Congress should have included the following mandatory safeguards for taxpayers and homeowners. Policy-makers, acting quickly, did not include any safeguards and need to be educated about the need to adopt the following:

(1)    Most importantly, protect taxpayers by protecting homeowners. Allow bankruptcy court-supervised loan modifications to prevent foreclosure, maintain neighborhood property values and lower the cost of the bailout.

(2)    Protect taxpayer investments: Strengthen oversight of any money spent and give taxpayers a better chance to make their money back through equity stakes in both firms and their assets.

(3)    Other reforms to the bailout proposal that are necessary include the following: It lacks adequate controls over executive compensation; it fails to include enough mandatory provisions to prevent gaming of the bailout system; it fails to adequately penalize participants for bad behavior.



 

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