The Wall Street Reform and Consumer
Protection Act
The House Financial Services Committee has responded to the nation’s financial
crisis by crafting a comprehensive set of measures that will modernize America’s
financial regulations and hold Wall Street accountable. Once signed into law, this
package of reforms will work together to address the myriad causes – from predatory
lending to unregulated derivatives – that led to last year’s meltdown. The Wall Street
Reform and Consumer Protection Act includes the following major provisions:
Consumer Protections: Creates the Consumer Financial Protection Agency (CFPA),
a new, independent federal agency solely devoted to protecting Americans from
unfair and abusive financial products and services.
Financial Stability Council: Creates an inter-agency oversight council that will
identify and regulate financial firms that are so large, interconnected, or risky that
their collapse would put the entire financial system at risk. These systemically risky
firms will be subject to heightened oversight, standards, and regulation.
Dissolution Authority and Ending “Too Big to Fail”: Establishes an orderly
process for dismantling large, failing financial institutions like AIG or Lehman
Brothers in a way that ends bailouts, protects taxpayers, and prevents contagion to the
rest of the financial system.
Executive Compensation: Gives shareholders a “say on pay” – an advisory vote on
pay practices including executive compensation and golden parachutes. It also
enables regulators to ban inappropriate or imprudently risky compensation practices,
and it requires financial firms to disclose any compensation structures that include
incentive-based elements.
Investor Protections: Strengthens the SEC’s powers so that it can better protect
investors and regulate the nation’s securities markets. It responds to the failures to
detect the Madoff and Stanford Financial frauds by ordering a study of the entire
securities industry that will identify needed reforms and force the SEC and other
entities to further improve investor protection.
Regulation of Derivatives: Regulates, for the first time ever, the over-the-counter
(OTC) derivatives marketplace. Under the bill, all standardized swap transactions
between dealers and “major swap participants” would have to be cleared and traded
on an exchange or electronic platform. The bill defines a major swap participant as
anyone that maintains a substantial net position in swaps, exclusive of hedging for
commercial risk, or whose positions create such significant exposure to others that it
requires monitoring.
Mortgage Reform and Anti-Predatory Lending: Would incorporate the tough
mortgage reform and anti-predatory lending bill the House passed earlier this year.
The legislation outlaws many of the egregious industry practices that marked the
subprime lending boom, and it would ensure that mortgage lenders make loans that
benefit the consumer. It would establish a simple standard for all home loans:
institutions must ensure that borrowers can repay the loans they are sold.
Reform of Credit Rating Agencies: Addresses the role that credit rating agencies
played in the economic crisis, and takes strong steps to reduce conflicts of interest,
reduce market reliance on credit rating agencies, and impose a liability standard on
the agencies.
Hedge Fund, Private Equity and Private Pools of Capital Registration: Fills a
regulatory hole that allows hedge funds and their advisors to escape any and all
regulation. This bill requires almost all advisers to private pools of capital to register
with the SEC, and they will be subject to systemic risk regulation by the Financial
Stability regulator.
Office of Insurance: Creates a Federal Insurance Office that will monitor all aspects
of the insurance industry, including identifying issues or gaps in the regulation of
insurers that could contribute to a systemic crisis and undermine the entire financial
system.
Financial Services Committee Debate Information
Total Financial Reform markup time: Over 50 hours of debate
Amendments Totals-
120 Republican Amendments Considered
46 Roll Call Votes on Republican Amendments
51 Republican Amendments Accepted
134 Democratic Amendments Considered
11 Roll Call Votes on Democratic Amendments
111 Democratic Amendments Accepted
24 Bipartisan Amendments Considered
3 Roll Call Votes on Bipartisan Amendments
21 Bipartisan Amendments Accepted
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