I am alarmed at what is happening to consumer protections in the Senate finance reform bill and cannot remain silent. It is a case study in what happens to legislation when Wall Street lobbyists roll up their sleeves and get to work turning the screws on legislators until they get what they want -- taxpayers be damned. Some of the strongest consumer and taxpayer protections we included in the legislation that passed the House, (H.R. 4173, The Wall Street Reform and Consumer Protection Act of 2009) have not survived the Senate's process of appeasing Wall Street lobbyists. And now we see that the Senate bill is being weakened further.
One of the most egregious examples is the vote taken on Wednesday night to remove the $50 billion dissolution fund from the finance reform legislation and replace it with a confusing and ill-conceived plan to pay for the break up of a failed large financial firm with the remaining assets.
In the House, the dissolution fund was adopted via an amendment I offered in committee that would have been funded by $150 billion in assessments to the banks that would pay for any costs incurred by a failed financial firm that could not be resolved through bankruptcy. This fund was paid for by banks and its sole purpose was to pay for chopping up and selling the remnants of a failed bank. It also served to disincentivize banks from taking too many risks by increasing their assessments as they do riskier and riskier things.
Here is a clip of me describing the amendment I offered in committee from the House floor debate in December:
Think of this fund as an insurance policy. If Goldman Sachs wants to get a sports car and drive through downtown at 100 m.p.h., they would have to pay much, much more into the fund than the bank that was driving the speed limit and obeying all the traffic laws. Under the new Senate plan, Goldman can drive its car all that it wants at whatever speeds it wants and when it crashes and runs several other innocent consumers off the road, they will leave the taxpayers to clean it up, bail it out, and salvage the worthless pieces.
Let's be clear, the Democrats in the Senate, with a lot of heavy lifting by Democrats in the House, had withstood the worst of the untrue, unfair, and unrelenting attacks from the Republicans who oppose regulating Wall Street and protecting consumers and taxpayers from the largess and long-shots of investors profiting from fluctuations in the economy. The notion that the dissolution fund was some sort of "bailout" had been thoroughly debated -- and thoroughly debunked.
But unable to resist snatching defeat from the jaws of victory, the dissolution fund appears to be out of the Senate bill. Appeasing Wall Street is to be expected from the GOP who do little to hide their true intentions and their defense of the wealthiest financial institutions and interests. But my real disappointment is with my Democratic colleagues who have caved in when they stood a chance to make a real difference for American taxpayers and consumers. There's nothing wrong with reasonable and principled compromise over genuine and honest policy differences, but that is not what we've seen with the elimination of the dissolution fund. I urge the Senate not to continue down the slippery slope of appeasing Wall Street and its Republican allies.
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