A year ago Wall Street’s financial rupture sent the economy hurtling into a massive crisis, crushing tens of millions of Americans in an avalanche of unemployment, underemployment, home foreclosures, reduced incomes and lost benefits. That financial rupture was caused by a combination of rapacious, mindless greed on Wall Street, the then-bloated housing bubble, and the failure of both regulators and of the financial regulatory structure.
Tomorrow the Senate Banking Committee will begin to take up Senator Chris Dodd’s (D-CT) proposals for sweeping financial regulatory changes. In a statement announcing the proposed legislation last week, committee chairman Dodd said:
“Over the past year, Americans have faced the worst financial crisis since the Great Depression. Millions of Americans have lost their homes, their jobs, and their savings – and yet, they’ve watched some of the people and institutions that caused this mess collect million dollar bonuses and receive billion dollar bailouts.”
“Those hard working Americans are asking, what is the government doing to ensure their economic security?”
“It is the job of this Congress to restore responsibility and accountability in our financial system to give Americans confidence that there is a system in place that works for and protects them.”
“We must create a sound foundation to grow the economy and create jobs.”
“The financial crisis exposed a financial regulatory structure that was the product of historic accident, created piece by piece over decades with little thought given to how it would function as a whole, and unable to prevent threats to our economic security.”
“For decades, Washington has failed to deliver the substantial reform we need. If we fail again this time, our economy will be vulnerable to another crisis.”
Both the Obama Administration and the House Financial Services Committee have developed separate regulatory reform plans. But in the view of most observers, Dodd’s proposals would go much further in establishing a fundamentally new regulatory structure and in imposing tighter controls on financial institutions, investment instruments and trading practices — particularly for derivatives.
In a statement released by the Senate Banking Committee, and at his press conference, Dodd marked his determination to succeed with this major regulatory overhaul:
“I will not stand for attempts to protect a broken status quo, particularly when those attempts are made by some of the same special interests who caused this mess in the first place.”
“The American people have been through a lot over the past year. I hear from them every day. They are business owners forced to shutter their doors and lay off workers because their credit dried up. They are senior citizens who have delayed their retirement because their 401(k) vanished. They are ordinary Americans who did nothing wrong, but are paying a steep price. They deserve an economy in which Americans can find jobs, manage their money, and build better futures for their families. They deserve the real and meaningful change in this bill.”
Discussing two of the most critical components of his plan, Dodd continued:
“Our plan will stop abusive practices by creating an independent Consumer Financial Protection Agency with one mission: standing up for consumers. Whether taking out a mortgage, getting a credit card, or investing for retirement, Americans deserve to receive clear and accurate information, to be protected from hidden fees and abusive terms, and to know that the financial products they’re being offered are safe.”
“We will end “too big to fail.” We cannot allow the collapse of a few firms to threaten our entire economy. Our plan will create an independent council of regulators to identify risks, so that government can act to prevent a crisis. We will have a mechanism in place to safely shut down large failing companies without destabilizing the financial system. No longer will the Federal Reserve’s emergency lending authority be used to prop up a failed institution.”
Other key provisions would create a single federal banking regulator; eliminate regulatory gaps for over-the-counter derivatives, hedge funds, asset-backed securities, and payday lending; require companies that sell mortgage-backed securities to keep “skin in the game” so investors won’t be sold worthless securities; and give shareholders a greater say in how executives are compensated.
Not surprisingly, the two biggest defenders of the financial status quo are not at all happy with Dodd’s regulatory reform plan. The American Bankers Association immediately attacked the Dodd plan saying it “would tear apart the existing regulatory structure only to create a new one”. And the U.S. Chamber of Commerce has launched an effort to kill the proposed Consumer Financial Protection Agency (CFPA). These and other powerful special interests and financial industry lobbyists will no doubt be working feverishly to kill Dodd’s reform plan outright, or slice and dice it until its substantative provisions are eliminated or fundamentally weakened.
Standing alongside Vice President Joe Biden and 4th District Congressman Jim Himes (D-CT), Senator Chris Dodd (D-CT) yesterday told a crowd of more than 400 supporters and guests how crucial the recovery program and health care reform are to the economy, then added emphatically: “We are going to get the public option” and received an extended, cheering ovation.
I can tell you because I was there.
The occasion was an event, featuring the Vice President, chosen to highlight transportation infrastructure investments flowing from the American Recovery and Reinvestment Act, at a site adjacent to a reconstruction project on Connecticut’s Merritt Parkway near Exit 46 in Fairfield.
Dodd’s remarks came as he and other Senate leaders prepare for expected health care bill merger sessions. That is assuming that the bill passed by the Senate Health, Education, Labor and Pensions (HELP) Committee — which has a public option — is to be merged with one yet-to-be-passed by the Finance Committee — which does not. A vote in the Finance Committee has reportedly been delayed again.
If and when the Finance Committee ever does report their health bill (I won’t call it ‘reform’), the merger sessions will involve Senate Majority Leader Harry Reid (D-NV) and the White House, as well as Senator Baucus and leaders on the Senate HELP Committee. Senate sources report that both Senator Dodd, who as acting chairman during Sen. Ted Kennedy’s illness, led the health care reform effort in committee, and current HELP chairman Tom Harkin (D-IA) will be involved in the merger sessions.
Dodd and Harkin, those sources say, both intend to press for inclusion of the public insurance option plan in the merged and final versions of the Senate bill. Committee staff note national polls showing that the American people want the option of a public insurance plan, and that leading physicians’ groups agree. The public option included in the HELP Committee’s reform bill gives people choices, they note, creates a nationally portable program and puts people ahead of profits.
At a recent gathering of online writers and local bloggers in Connecticut, I had an opportunity to discuss the health care legislative process with Senator Chris Dodd. Specifically, I raised the idea, originally proposed by David Waldman, to name the public option for Ted Kennedy.
After a lively conversation in which he said “that’s a good idea” he went on to discuss some interesting process and jurisdictional points relating to the health care legislation in advance of the expected bill-merging sessions.
Thanks to ctblogger for the video.
At 3:48 of the clip Dodd anticipates some of the factors that may play out in those Senate bill-merging sessions:
“The Committee I was chairing [HELP] has much more jurisdiction over health care than the Finance Committee. Now, they have the jurisdiction over arguably the difficult parts, dealing with Medicare, Medicaid and (inaudible) and tax policy; but all of the prevention, all of the quality, all of the workforce issues and the coverage questions were legitimate matters of jurisdiction of the HELP Committee.”
These jurisdictional arguments will be one of many that, Senate sources say, Dodd and Harkin will use to press for the public option as well as other crucial components from the HELP Committee bill in the merged Senate version. If they succeed we will have a much better final bill.
You can help them succeed. Thank Senators Dodd and Harkin and tell them you support their efforts to put the public option in the merged Senate health care bill.
And join in Wednesday and call your two senators and your representative at 1-877-323-5246 as the AFL-CIO helps lead a National Call-In Day for health care reform.
When Senator Chris Dodd (D-CT) decided recently to remain chairman of the Senate Banking Committee you could hear the financial industry lobbyists let out a collective groan.
It was Dodd who earlier this year championed credit card reform in Congress, helping to pass a bill, then signed by President Obama, to end the abusive and deceptive practices of the credit card companies.
Now Senator Dodd is gearing up to take on the banks on several fronts including overdraft fees, consumer financial protection and regulatory reform.
The Washington Post reported Monday that Sen. Dodd plans to introduce legislation to rein in bank overdraft fees.
A backlash is brewing on Capitol Hill against banks that charge large fees for overdrafts without asking or telling customers, the latest sign that the financial crisis is shifting the balance of power from banks toward borrowers.
Sen. Christopher J. Dodd (D-Conn.) plans to introduce legislation requiring banks to get permission from customers, rather than allowing overdrafts automatically. If customers decline and then try to overspend, the transaction would be rejected. A similar bill is pending in the House.
With the rapid expansion of bank debit card use in recent years, banks have found it highly profitable to automatically allow most debit transactions to process regardless of whether sufficient funds are available in the account, then charge the customer anywhere from $10 to upwards of $30 per overdraft.
Some banks maximize penalties by processing the largest purchases a customer makes first, draining accounts faster and creating the potential for multiple fees on multiple smaller purchases. Even on point of sale transactions, such as debit card or ATM transactions, banks do not notify the customer when they are withdrawing against insufficient funds. As a result, customers can unknowingly be charged hundreds of dollars in fees for only overdrawing their account on a few small purchases.
As evidence that the tide is beginning to turn against the unfettered power of the banks, even before Sen. Dodd’s legislation is introduced, major banks are scurrying to try to cover themselves.
Bank of America and JPMorgan Chase, two of the nation’s biggest banks, announced plans on Tuesday to drastically overhaul their debit card programs by lowering or eliminating fees, changing the way they credit transactions and allowing customers to opt out of overdraft protection.
The Chamber of Commerce, the business community’s umbrella group in Washington, recently organized a conference call coordinating some 200 representatives of groups who oppose the legislation. The call doesn’t mention any of the serious problems that led to the financial crisis or why consumer regulation is important. Instead, it follows a “death panel” approach to political discussion: Scare the hell out of everyone.
Dodd has been slamming industry opponents of the plan for months. At a Senate committee hearing earlier this session, referring to a story in the Washington Post, Dodd said:
“When I pick up the morning newspaper and I read the first headline that ‘Fault Lines Emerge and Industry Groups Blast Plan to Create Consumer Agency,’ what planet are you living on? The very people who created the damn mess are the ones now arguing that consumers ought not to be protected. They’re the people who paid this price. And the idea that you’re going to first attack the very clients and customers who depend on you every day is not the place to begin.”
