What's Happening with the Wall Street Reform and Consumer Protection Act of 2009?

Today the House passed H.R. 4173: Wall Street Reform and Consumer Protection Act of 2009. The vote was 223 to 202 with 27 Democrats joining all of the Republicans in a no vote.

The actual bill is in the Congressional Record, with the latest Congressional actions (not real time).

Here is a list of amendments. The current House Roll Call vote is here.

The House allowed 36 amendments for debate, which severely limits the real number of amendments up for consideration. It appeared to be a strategic move to block the flurry of Republican amendments.

See this post on two amendments to gut the bill.

Earlier this morning, House Speaker Nancy Pelosi posted the latest legislative actiion with the bill summary and the latest selling points on the bill.

We now have a bill managers amendment. This 240 page, hand edited amendment is here, but also attached to this post due to the House Server load.

Below are some questions which will be updated as we read and find critiques, with the actual legislative language.

Bear in mind Congress loves to change language at the last minute, bills at the last minute. As information is found this post will be updated.

The Huffington Post has a chart outlining some existing loopholes, but I'm not sure this is in real time. (it's pretty difficult to digest a 240 page amendment in 5 minutes, so please read the legislative text and comment).

The Wonkroom over at Think Progress is now blogging the floor proceedings and amendments for additional info.

Questions on the what's really in the bill:

1. Does the Bill create a permanent bail out?

Currently that answer is no and that was done through a host of amendments while the bill was in committee. This post by ZeroHedge is wrong, using old information.

What specifically they are referring to is p. 397 in the bill and it's establishment of a Systemic Dissolution Fund. This fund is for the winding down of an institution that needs to fail. The issue is whether this is a permanent bail out fund, on the U.S. taxpayers. The current claims are it dumps the financial responsibility on the large financial institutions themselves. From the bill:

(ii) to ensure that any taxpayer funds utilized to facilitate such liquidations are fully repaid from assessments levied on financial companies that have assets of $50,000,000,000, adjusted for inflation, or more.

This $50 billion threshold is adjusted yearly. It also covers hedge funds greater than $10 billion. It has a cap on scaled fee assessments of $150 billion. It does allow for borrowing from the U.S. Treasury but caps it at $150 billion and stipulates that the money is only for dissolution of the corporation.

2. Has "Rep." Melissa Bean Gutted the Consumer Financial Protection Agency?

PRWatch claims yes:

Big bank defenders, led by Melissa Bean (D-IL), got language into the bill that would allow federal laws governing consumer protection to preempt many of those set by individual states and make it harder for state Attorneys General to enforce consumer protections.

Generally, since details change and are confusing, one can call their representatives and just demand anything from Melissa Bean be ripped out of the final bill. She is a notorious corporate lobbyist tool, so you've got your bases covered by just saying reject pretty much any amendments she presents.

Unfortunately Corporate Bean's attempts to gut consumer financial protections is in the Frank manager's amendment (attached).

3. Are mortgage cram downs in the bill?

No as Bloomberg reports. A explicit amendment was voted down which had a provision to allow bankruptcy judges to finally reduce principle, fees, interest rates. Pretty damn stupid isn't it? We have 3.9 million foreclosures this year. Hell, don't want to hurt those banks profits by stopping them from kicking out widows, children and families out into the cold. We'll just ignore the long term damage the foreclosure tsunami bring to citizens, local, state governments, communities, the middle class and macroeconomic growth. (Sorry, I digress but this complex maze of legislative banks find your loophole cheese text is pathetic).

4. Was there an attempt to completely remove the Consumer Financial Products Agency Itself?

Yes, but the amendment failed, although watering down did pass. The amendment was by Minnick and it replaced the CFPA with some "Council" and is here and #35 in the above amendment list. This vote will determine just how much lobbyists are running this show.

Amendments that Passed

This section will be updated as votes can be determined. Note Barney Frank bundled additional amendments which passed by voice vote. Which amendments those are we did not catch in watching the floor proceedings yesterday. All other amendments (numbered list), failed beyond the below tally.

  • Barney Frank's manager amendment(1) - passed
  • Lynch's amendment (5) - passed
  • Murphy, change definition of swap participant (6) - passed
  • Peters amendment, take new dissolution fund to repay rest of TARP(13)- passed
  • Schakowsky amendment, regulate reverse mortgages (32) - passed

What got through to gut/improve the bill

Since Melissa Bean's corporate lobbyist agenda to water down the CFPA was put into Frank's manager amendment it passed.

Would add the head of the CFPA to the Financial Services Oversight Council and clarifies that prudential standards promulgated under the Financial Stability Improvement Act of 2009 do not supersede state or federal consumer protection standards.

Also gave some nice loopholes to the CFPA:

Would provide an exemption for any retailers and other non-financial firms subject to the Consumer Financial Protection Agency Act

Also lowered the standard to sue credit ratings agencies. Now it's just gross negligence.

We also had a limit of financial institutions' ownership on OTC derivatives clearing houses. Limit to 20%.

Updates as Determined

I want to point to this post by William Greider on the funding of this "systemic dissolution fund" having access to the Fed discount window.

The crucial terms for Fed financing are set by an innocuous-sounding amendment offered by Representative Brad Miller of North Carolina. Any financial holding company designated as a "systemic risk" and subject to stricter regulatory standards "shall have the same access to the discount window lending of an appropriate Federal Reserve Bank as is available to a member bank of each Federal Reserve bank."

So far I have not found such an amendment. It's clear, at the last minute amendments have changed, it's unclear if sponsorship also has, so bear with us while we parse through the language to see if this is true, this bill creates a permanent bail out fund.

Most of the changes were in Rep. Barney Franks manager's amendments. According to this site, we have:

It would include a change sought by Rep. Brad Miller that would cut in half, to 10%, a haircut the FDIC could impose on secured creditors when resolving systemically significant firms. The provision was also narrowed to focus on short-term lending of 30 days or less and to carve-out federally backed credit including advances from the Federal Home Loan banks, Treasury securities and debt guaranteed by the government-sponsored enterprises.

On more power to the Federal Reserve, again from the manager's amendment:

The manager’s amendment would explicitly give the Fed the same power under the Bank Holding Company Act to prevent mergers, acquisitions or consolidation of non bank financial holding companies. It also adds language to clarify that prudential regulators have broad authority to require tougher standards on firms they regulate that pose a systemic risk.

and on the funds and power of the FDIC to wind down institutions, again in the manager's amendment:

The manager’s amendment makes several changes to a provision that would let the FDIC set up a debt guarantee program for solvent firms. It would cap that program at $500 billion and clarify that any special assessment needed to cover losses would only come from institutions that participated in the program. It would also permit the FDIC to require warrants for assistance provided. The manager’s amendment would also empower the FDIC to push a defaulting borrower into receivership or bankruptcy.

On the derivatives regulation loopholes, please read this post, Four "Drive your Truck through it" Loopholes in Dervatives Reform. I've managed to find two of the 4 loopholes mentioned in the legislative text to date, but the other 2 are probably in there (and maybe a few more that have not been discovered yet).

As we find more details this post will be updated.

Update: This Huffington Post article has a new YAL (yet another loophole). But notice the strategy. How can one have a formal discussion on the House floor, never voted on, yet somehow implies passage, just because a couple of corrupt lawmakers spelled out how they want to make sure the CFPA cannot regulate most financial institutions?

Perlmutter and Financial Services Committee Chairman Barney Frank engaged in a colloquy Thursday night -- a pre-scripted dialogue on the House floor -- so he could get the spirit of his loophole in the bill without actually having to have a vote.

It's now enshrined forever in the Congressional Record as Congress's intent -- a loophole for some of the nation's biggest banks to evade additional scrutiny of their consumer practices in the wake of the biggest economic crisis in 80 years, brought about in large measure because of the lack of adequate consumer protections.

YAL: Yet another loophole was amplified. All auto dealerships are exempt from the CFPA. This auto loan market is as large as credit cards and is completely exempt from any oversight, regulation.

PDF icon frank_hr4173.pdf1.75 MB



For those keeping track at home - #3

Thanks Rebel

I'm trying to track as best I can, but we need a hell of a lot more eyeballs on this.

It doesn't matter at the moment what we really want, this is what we're gonna get, at least from the House, so the ability to stop a last minute gutting is what the focus needs to be on.

It seems they are doing a host of these corporate style of amendments by voice vote, then demanding a roll call and deferring/delaying the actual vote as a result.

I already sick this bullshit about end users

Many end users are extending derivatives beyond simply hedging they are making it into a profit center.

RebelCapitalist.com - Financial Information for the Rest of Us.

Let me clarify

Its one thing to have regulation effect the cost of production or cost of doing business to an excessive point but that is incredibly different from a situation where regulating something simply effects the size of the profit margins from that activity. The latter situation certainly doesn't outweigh the benefits of the potential regulations.

RebelCapitalist.com - Financial Information for the Rest of Us.

need some help

Frank is arguing against this amendment which (once again) redefines those being required to be regulated on derivatives. This "seems" to be sponsored by U.S. manufacturing, who do hedge against sudden price changes in raw commodities, energies.

I don't know which one is worse, first I heard of this, not sure why a regulated OTC derivatives market would hurt them and so on.

Def. of major swap participant. On the other hand, if there is an exemption I imagine GS would want to be recategorized as a U.S. manufacturing company. ;)

seems to be better

Stupak (yes I know, surprise, suprise) but I don't understand why they cannot regulate all derivatives, period and this amendment seems to pull more out from exemptions.

banks declare victory

By Frank enabling corporate lobbyist puppet Rep. Melissa Bean get her lobbyist wish list into the manager amendment.

Documenting the tragedy is the Washington Post.

Yes, they won this battle. There is the senate but

I'm still going through it

but the rejection of the Stupak amendments was really bad news, although the rejection of one of Franks was good news.

A whole slew of amendments were passed by voice vote at the end and I didn't catch them all.

What I'm finding amazing it is seems we're the only econ blog watching this blow by blow.

Thanks for trying to track

What a complex mess. They should just break up the big banks.

Good try.

Looks like cram down lost again.


I thought I read some of this in the manager's amendment (1) and the bill itself, in addition to amendment #19, which failed and was explicit.

This is going to have to be one of those ongoing posts because the bill is so complex and they change things...
but it almost doesn't matter because it must go to the Senate and then to conference.

Kind of like health care, you believe you got your public options, but oops, it's gone.

This is worse than a sausage grinder

it's truly beyond the pale generally

and why I put up Kaptur's floor speech. We have legislation and policy being crafted....by lobbyists and if there is any prayer's chance the people might get an amendment in there, they send their puppets to kill bills.

I mean literally we have corporations writing legislation and in the case of the financial institutions, many paid for their "campaign contributions" and lobbyists with TARP funds, i.e. taxpayer money.

I couldn't monitor the floor proceeding so the votes on all of the amendments isn't in the clerk's roll.

Also, Frank last night put a host of amendments together and they passed with voice vote. What's in them is anybody's guess.

My impression is, because this bill is so complex, there is almost no one reading the legislative text to figure out what's really going on.

I do think that Seeking Alpha post is correct and that's just a crime! It was derivatives which caused systemic risk in the first place.

Abandon Hope All Ye Who Enter Here

What point is there in expending the energy to follow the minutiae of these proceedings when anyone past age 12 knows that anything these weasels pass will be only the worst sort of window dressing. When those assumed to be championing the peoples interests are headed by scum like Frank, probably the most loathsome maggot "public service" has produced in 50 years, you know its a good time to be an investment banker. Like the Paul/Grayson effort to audit the Fed, this bill is likely to be savaged thoroughly by the time it reaches the desk of escalation-is-withdrawal enthusiast, Barak Ohmama. Settle back, kick off your shoes, this one was over before it started. You'll know your day will have arrived when every street and mall in Washington DC is filled with angry faces and the economy has been utterly paralysed by strikes. And with ever uptick in the unemployment numbers that day draws closer.

I'll gather you're "pitch fork ready"

There's no doubt this bill took the wind out of my sails and I've asked myself the same thing, since we know the Senate will assuredly gut worse and then there are the conferees.

That said, one of the points of EP is to get ourselves and hopefully others to try to look at what's going on and put more public awareness on how little reforms we're getting.

But yeah, I gotta say, the corporate takeover of America is pretty brazen, so one has to wonder.

Corporations And Then Some

"But yeah, I gotta say, the corporate takeover of America is pretty brazen ..."

Although these components are by no means exhaustive, in the main, the control is being exerted by financial, arms, drugs and Middle East foreign policy interests, AIPAC specifically. These interests have so perverted the operation of democracy in this country that, for all intents and purposes, it - our democracy - ceases to exist. There will be no remedy via the franchise or through parliamentary mechanisms. Demonstrations and strikes are the only workable response. What is imagined here is something along the lines of the Solidarity protests in Poland in the early 1980s. Then, the Poles faced something quite comparable to the dilema we face today. Yet, mustering real courage, they faced down a totalitarian regime every bit as willing to suppress their rightful democratic asperations as our ruling class would be ours if things were to come to that. Who doubts that someone benefiting from the status quo as much as, say, Dianne Feinstein, or Max Baucus, would be hesitant to call out the national guard to put down a veritable army of the foreclosed upon and unemployed.

Wendell Phillip's observation, "Revolutions are not made, they come", is perhaps instructive here. Any steps decisively leading to the restoration of authentic democracy in the United States must arise spontaneously from the people and must build inexorably, they cannot be artificial or contrived. You'll be more likely than not to know they've happened after the fact than before. Would that they they materialize soon in any case.

Day of Reckoning

Stores closing, banks only lending at usurious rates, more foreclosures -- the Fed needs to do something to force banks to disgorge the largesse Helicopter Ben has given (so generously!) What we need is a national cooperative with Fed access to do small business lending.

Just the other night, we were at an Italian restaurant we have patronized for years. They have always done great veal, but they were "out of veal" The new owner was talking to someone at the next table. Let it slip that he was carrying a 30K Visa bill. Not a good sign.

If he had asked me, I would tell him the same thing I told a relative who asked me for a loan so he could pay his Visa bill -- "They can't put you in jail for owing a bank money." I only hope the restaurant owner stays afloat so we can keep eating there. Another restaurant in our community I went by -- only 3 tabl;es occupied out of 15.

Frank T.

Frank T.

Credit card funding small business

This would be a very good research topic. Precisely how many small businesses are using credit cards as their loan source?

I've heard this story over and over and then even worse, using personal credit cards.

On the fairly weak/useless reforms, small business credit cards are exempt. So, is small business being charged 17%, 22%, 30%?

If so, this would explain a lot.

Which is another thing, we need some statistics on precisely how many small businesses have failed this year.

I know where I am, they dropped like flies, lots of "for lease, for rent" signs up in restaurants, store fronts...
but that's not the stats.

Beyond a few inferences on a few shows, I cannot recall any article or blog post anywhere on this either, so exposing it would be a good activity.

Grading Financial Reform

Forbes breaks it down.

$4 trillion dollar gift to bankers

A Bloomberg reporter read the entire bill and of course just finished and says:

Instead, it supports the biggest banks. It authorizes Federal Reserve banks to provide as much as $4 trillion in emergency funding the next time Wall Street crashes. So much for “no-more-bailouts” talk. That is more than twice what the Fed pumped into markets this time around. The size of the fund makes the bribes in the Senate’s health-care bill look minuscule.

He's probably right, the safeguards on not giving the financial sector a blank check are pretty weak.

His report deserves to be read. Anybody who could make it through the entire bill and digest it deserves a large year end bonus.