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- iHaveNet.com: Economy
by Arianna Huffington
It's mission accomplished for financial reform.
Unfortunately, it's more of a Bush 43 "mission accomplished" than an Apollo 13 "mission accomplished." That's because the financial reform bill passed by the
The Restoring American Financial Stability Act of 2010 will do no such thing. First, it doesn't do enough to rein in Wall Street. It doesn't end "too big to fail" banks, doesn't create a Glass-Steagall style firewall between commercial and investment banking, keeps taxpayers on the hook for future bailouts and leaves open dangerous loopholes in the regulation of derivatives. And we can expect more loopholes to be inserted as the bill heads to conference committee. In D.C., crafting a bill without them would be like baking bread without yeast. Though you can't see them, they're what makes a Washington bill rise.
There's a reason a longtime investment banker, speaking to The
Don't expect a similar reaction on Main Street. Despite its name, this bill will not be restoring financial stability to the tens of millions of hardworking Americans whose lives have been turned upside down by the economic crisis.
In a speech last week, Sandra Pianalto, president of the Cleveland Fed, surveyed the landscape and did not see a lot of financial stability, partly because of the huge loss of skills that is being suffered by the long-term unemployed. "Research &ellips; tells us that workers lose valuable skills during long spells of unemployment, and that some jobs simply don't return," she said. "Multiply this effect millions of times over, and it has the potential to dampen overall economic productivity for years."
Her conclusion: "Many people are now just aiming for 'financial security' as their American dream." In other words, the core idea of the American Dream -- work hard and advance up the ladder -- has been gutted. Now the American Dream is to try to not fall, or do all you can to slow your rate of decline.
This isn't to say that there were no provisions that would help Main Street considered as part of the Restoring American Financial Stability Act of 2010. There were plenty -- it's just that almost all of them were either voted down or taken out and never even put up for a vote. Even something as simple and sensible as putting a cap on credit card interest rates. Sheldon Whitehouse's amendment to do just that was voted down 60 to 35. So much for "financial stability." Though I suppose it depends on whose financial stability you care about -- the banks' or the taxpayers'.
Or how about payday lending -- the largely unregulated advances on a paycheck that can carry rates in the triple digits? In Missouri, for example, rates can top 600 percent. Yes, you read that right. North Carolina's Kay Hagan offered an amendment that would have clamped down on the $40 billion industry. It was killed without a vote because of Republican objections.
Objections that were, no doubt, the end product of the mother of all lobbying campaigns: all told, the financial industry has spent nearly $600 million on lobbying since the collapse of
A lot of money, sure, but if what you care about is the financial stability of the banks, it was money well spent. Take, for instance, the Merkley-Levin amendment that would have forced big banks to get rid of their speculative proprietary trading activities, a version of the Volcker Rule. And you can take it, because the
We've been told time and time again over the last two years that right after Washington deals with what's on its plate, "jobs is next." Well, it's been "next" for quite some time now, but it never seems to come to the floor. And now that a financial reform bill has passed, the talk on the Hill is that climate control or immigration will be tackled next.
A recent study by Duha Tore Altindag and Naci H. Mocan for the
No shock there. But it should frighten anyone genuinely concerned about our stability, financial and otherwise.
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Financial Reform: Win for Wall Street - Cold Shoulder for Main Street