Financial Regulatory Reform – HR 4173

July 15, 2010

By Padmini Arhant

Congratulations! To President Barack Obama, Senator Chris Dodd, Rep. Barney Frank and other Congress members from both sides of the aisle for their contribution to the historic victory on the Financial regulations bill.

The United States Senate approved the long overdue financial regulatory reform that was challenged by Wall Street and their representatives since conception.

Not long ago, the global economy faced the possibility of the ‘Great Depression,’ emerging from the deregulated financial markets with extraordinary privileges in the public fund mismanagement and speculative trading showing no regard for the dire consequences, now a harsh reality experienced by the billions around the world.

Wall Street exercising the ‘free market’ power to engage in calculated high-risk ventures especially through derivatives and hedge fund activities led to a near free fall in the absence of any oversight on the reckless involvement.

The U.S. economy would have succumbed to the economic crisis if not for the American Investment Recovery Act passed by the Democrats and isolated republican members in Congress.

President Barack Obama and the lawmakers behind this legislation deserve credit in this regard.

Unfortunately, their actions have not been truly acknowledged for the substantial measures implemented through this stimulus bill aimed at helping citizens across the political spectrum.

The positive results benefiting American life from the economic stimulus subverted for political reasons in the election year.

In a democracy, the most grueling aspect is the legislative process.

It’s even harder with the special interests controlling the legislative course on every issue, further exacerbated by the majority in the opposition pledged to defeat the legislation against national interest.

With respect to HR 4173 – it’s a monumental task to gain unanimous consensus on a broad legislation targeting the most powerful sector in the economy.

As expressed by the Chairman, U.S. Senate Committee on Banking, Housing and Urban Affairs, Chris Dodd, the dissatisfaction from the different political factions are legitimate and reaching an agreement on common grounds is the preliminary step towards consumer protection along with many other important regulations in this bill.

Arguably, it is not perfect as every Senator holds some reservations and distinct views about their support or the lack thereof in the crucial legislation.

The main components of the bill are elaborated in the –

Pros and Cons: The Treasury secretary historically and more relevantly have close ties with Wall Street – going back to several administrations.

Hence, the conflict of interest is a major concern with the Treasury secretary as the head of the 10 member regulatory council – evidenced in the failure to monitor the financial market between 2000 and 2008 that caused the economic meltdown.

Otherwise, the 10-member council of regulators representing the oversight committee is an effective strategy.

Given the facts on the subprime lending and credit card abuses, the consumer protection agency is the hallmark of this legislation.

The contentious derivatives and hedge fund management is subject to rigorous standards underscoring the transparency and accountability factor in this bill.

Opposition claim on the omission of the controversial Fannie Mae and Freddie Mac from the financial regulation could be clarified to dispel misconceptions about any exemptions to the lender.

The compromise on the $19 billion bank tax to earn the Republican Senator Scott Brown vote whereas not pursuing the Democrat Senator Russ Feingold seeking tougher regulations is an irony in the democrats led legislation.

Nevertheless, the three Republican Senators cooperation is praiseworthy.

Overall, the framework of this legislation encompasses the requirements to avert the financial crisis and the economic downturns barring no Wall Street intrusion in the regulatory mission.

Thank you.

Padmini Arhant


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