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October 16, 2021

Historic “Million Man March”, organized by Nation of Islam Minister Louis Farrakhan, rallies Black men in Washington, D.C. in 1995.

FINALLY, Financial Services Reform

POSTED: July 21, 2010, 12:00 am

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Last week the United States Senate passed the financial services reform legislation that it has been considering for the better part of a year. It was a nearly strictly partisan vote of 60-39, with Democrat Russ Feingold (WI) voting against the legislation because it does not go far enough, and Republicans Scott Brown (MA) and Olympia Snowe (ME) voting for the legislation. Senator Christopher Dodd (D-CT) and Congressman Barney Frank (D-MA) are to be commended for their persistence in shepherding this legislation. To be sure, it isn't perfect, but it is a step in the right direction, and it includes much-needed protections for consumers.

If I'd had my druthers, the new Consumer Financial Protection Bureau would have been freestanding, not part of the Federal Reserve. Still, the new bureau will have a presidentially appointed independent head, and it will have power to enforce rules dealing with mortgages, credit cards, and other financial products. Consumers have not had federal protection for a very long time, and this provision, alone, makes the legislation worthwhile.

The bill comes in at 884 pages, and I'll confess to relying on congressional summaries for information about the legislation. It is reassuring to know that large financial firms are no longer "too big to fail", but instead can be taken over by the Federal Deposit Insurance Corporation (FDIC). Too, bankers can no longer shop to find the friendliest regulators, since the new legislation streamlines regulation, eliminating some groups, and dividing the work among others. The market for financial derivatives is more closely regulated, which means that people can't sell futures on castles in the sky, but instead be forced to monetize their bets. All of these are steps in the right direction.

Do they level the playing field between Washington and Wall Street, or is the field still tilted in Wall Street's direction? With all the money that Wall Street pours into elections, and with the active participation of Wall Street insiders in this regulatory process, the fact is that Wall Street may still hold the upper hand. Still, consumers get a break, and taxpayers may be protected from having to bail out and pay off future Wall Street chicanery.

The unfortunate reality is that the quality of new regulation will depend on the new regulators. In other words, the quality of the appointments will make a big difference in the ways this legislation is implemented. Who will be the new head of the Consumer Financial Protection Bureau? If this person serves as the pleasure of the President, will a more conservative President appoint someone less inclined to fight for consumer rights? Will Wall Street come to Washington (as Treasury Secretary Tim Geithner has done) to protect their former interests? Or will consumers really have a voice in the way regulation is enforced?

One of the provisions of the new legislation relates an Office of Minority and Women Inclusion in all of the financial service agencies, with the charge of regulating diversity in management, employment and business activities. Kudos to Congressman Maxine Waters (D-CA) for consistently representing the least and the left out around financial issues. I remember her stellar work during the S&L meltdown in the early 1990s and fully expected that she would weigh in on the role of women and people of color in financial services reform. This work has the possibility of ensuring that those who have much to offer, but few opportunities, can participate in the financial services arena. While conservative commentators have rallied against the diversity requirements in the new legislation, the provisions survived the Senate vote and will be implemented.

With the Senate having passed financial services reform, perhaps they will now turn to extending unemployment benefits for the 2 million Americans who have been cut off by their inaction. In many ways the 2 million who have lost benefits are just the tip of the iceberg. Many others don't even qualify for benefits for various reasons. Still, the senate has not failed to pass bailout legislation, or tax breaks. Why do they continue to turn their backs on the unemployed? Extending unemployment insurance benefits, like passing financial services reform, is an imperfect solution, but a step in the right direction. Why not take that step?

Dr. Julianne Malveaux is a noted economist and president of Bennett College for Women

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