The Obama administration is planning to finally tackle financial reform after its two-week Easter recess according to House Financial Services Chairman Barney Frank. While some of the largest financial institutions in our country have been left in ruins, nothing compares to the damage that has been done to millions of families and small businesses.
While the financial reform bill was approved on a party line vote by the Banking Committee on March 22, 2010, there is much work ahead for the administration if it plans to win support from Republicans.
However, Frank predicts that support from Republicans will materialize over the next couple of weeks with little resistance because of the popular reform effort. With that said, there will be differences that need to be resolved but it’s good to see that both the House and Senate are working to tackle the same major issues.
The bill itself will update our regulatory system, which the administration is hoping will restore our financial security.
There are four major pieces to this proposed bill:
- It will end bailouts which ensure that a failing bank can be shut down without relying on taxpayer dollars to save it.
- It will create an advance warning system in the economy, so that there is always someone responsible looking out for the next big problem.
- It will ensure that all financial practices are transparent, so that exotic instruments like hedge funds and derivatives don’t lurk in the shadows and businesses can compete on a level playing field.
- It will protect consumers from unsafe financial products, such as the subprime mortgages that led to the financial crisis.
This covers a very broad aspect of the bill because as we have learned the devil is in the details. I can appreciate the fact that the administration knows that America’s taxpayers are sick of the giant Wall Street banks that are too-big-to-fail.
By imposing greater costs and restrictions on the superbanks it’s clear that the days of unfair or deceptive practices by large banks, mortgage companies, and major players in the shadow banking industry will come to an end.
Community banks are obviously the winners in this bill and not only will they no longer have to compete with unregulated non-banks, they will also follow the same rules they follow today.
R. Michael Menzies, Chairman of the Independent Community Bankers of America (ICBA), states that “This financial and economic crisis has clearly demonstrated the need for meaningful financial regulatory reform that protects America’s taxpayers and the integrity of our financial system. The best way to accomplish this is by ending too-big-to-fail and regulating and enforcing rules on the unregulated financial players. ICBA welcomes the draft legislation released today by Chairman Dodd because it moves financial regulatory reform forward and aims to safeguard future generations by reining in the systemically dangerous institutions that were at the heart of this economic catastrophe.”
As the Obama administration plans to get more aggressive over the coming weeks to pass financial regulatory reform, the giant firms will continue to spend millions of dollars to lobby against it.
We know better, and while our country’s 8,000 community banks were responsible but still paid a price for big banks’ mistakes, let’s hope that this administration will follow through with its promise and pass a bill that puts an end to abuse and deception.
Marco is founder of the Business Credit Insiders Circle which helps small business owners learn how to build business credit.
You may contact Marco directly at: email@example.com