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- iHaveNet.com: Politics
by Rob Silverblatt
Fresh off their healthcare victory, Democrats in
In December, the
Among the issues to be decided: What's the future of the "too big to fail" doctrine? How powerful should the Federal Reserve be? And should there be an independent consumer protection agency?
There are some early signs of compromise, but even the proposals billed as "middle of the road" have attracted fierce attacks. For instance, both the House and the
But Dodd's move alienated fellow Democrats, who have argued that the Fed has a proven track record of ignoring consumer protection. Rep. Barney Frank, the Massachusetts Democrat who is the architect of the House bill, has called the idea of making the agency part of the Fed "a bad joke."
Meanwhile, another delicate subject is the Democrats' proposals to wind down failing firms. The
Republicans have argued that it's essentially a bailout fund that will keep alive the notion that certain institutions are too big to fail. Democrats have countered that the money will not be used to prop failing companies up but instead to make sure that they can close their doors in an orderly fashion.
And even if the Democrats succeed in pushing reform through
To get a sense of what Democrats and Republicans are looking for in financial reform,
we spoke with Frank, who chairs the
What measures would need to make it into the final bill in order for you to consider it a success?
Barney Frank: An independent consumer agency, risk retention on securitization, the ability for federal officials to pick and choose when an entity has failed, and we have to pay some debts to prevent chaos. The problem last year was the view that they either had to pay nothing, as in Lehman, or everything, as in AIG. [The federal government also needs] the mandate to monitor for systemic risk and the ability to step in and insist on changes for institutions that might be incurring systemic risk. And we need a guarantee that if an institution gets in over its head, it dies and we will put it down in an orderly fashion, using this ability to pay some of the debts but not all of the debts.
Does the House bill that was passed in December -- the one in which the CFPA is a stand-alone agency -- go far enough in the area of consumer protection?
BF: With the bill we have, there's only one weakness, and that is the total exemption for auto dealers. I regretted that. Auto dealer financing is totally exempted. I thought that was a mistake; I lost that vote. Otherwise, the Consumer [Financial]
Do you expect financial regulation to get support from Republicans?
BF: In the House? No. Why would they change their minds? They voted against it. I think there are individual Republicans who would like to be supportive, but they are basically dominated by the Republican Study Committee, by the right wing. And as far as the
Will the momentum from passing healthcare help with financial regulation?
BF: A little bit, yes. But mostly it's the absence of healthcare as a blocking issue that's going to help us here.
What would a financial reform bill need to look like in order to get bipartisan support?
Spencer Bachus: We would need to address "too big to fail." That is critically important. And I don't think we're there yet. At the press conference at the
Are you concerned that the Democrats will push through a bill in a party-line vote?
SB: What I do fear the Democrats will do is they'll try to make a bill so onerous that they don't get Republican support, and then they [will say] that Republicans did not want financial regulatory reform, which we very much want. We simply don't want it done badly. If we get a bipartisan bill, it shows us that they seriously want regulatory reform. If we get a bill that has no Republican support, I think that's just a political ploy on their part to try to shift attention away from their failures with healthcare, where they did nothing to bring down the cost, or with energy legislation, where they refused to go with nuclear power and some other things that would help solve our dependency.
How would you go about handling
SB: I would start reducing a percentage each year of the home mortgages that they hold. They hold
Available at Amazon.com:
Supreme Power: Franklin Roosevelt vs. the Supreme Court
The Political Fix: Changing the Game of American Democracy, from the Grassroots to the White House
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The Road to Bipartisan Financial Reform | Rob Silverblatt
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