Friday, December 11, 2009

Don't Show Them The Money

The House of Representatives moved the country one millimeter closer to financial sanity today by passing the most sweeping regulatory bill on the banking and finance trades since the Great Depression. The bill would subject the moneyed interests to new rules that include regulations on derivatives for the first time and create a new agency to take over consumer protection powers currently held by banking regulators. The latter provision survived attempts to kill it, but not before (or after, whatever the time line was) allowing exceptions for some companies trading in derivatives. The biggest element in the bill is the ability to break up banks and financial companies deemed too big to fail. The bill would set up a special oversight panel comprised of several bureaucratic leaders to keep an eye on the market to look for firms that pose a threat to the nation's financial system.
House Republicans vigorously opposed the "overreach" of the new regulations on the financial sector (I don't call it the financial "industry," because that would suggest that financiers produce something of tangible or intrinsic value like manufacturers), and they all voted against it. Decrying the massive government intervention inherent in this bill, Republicans found themselves on the receiving end of criticism by the White House. "I didn't expect them to help after a meeting with one hundred lobbyists for the financial industry," White House Chief of Staff Rahm Emanuel said. "I'm not surprised they are opposed to it. The lobbyists are trying to gut this."
These provisions, if implemented, would mean a lot less money for financial firms to play with, and possibly lose. The government, to boil it all down, would be given the opportunity to prevent another 9/15. Representative Barney Frank (D-MA) is at the forefront of this effort.
Meanwhile, Kenneth Feinberg, who regulates executive compensation at firms bailed out by the government, has placed a salary cap on midlevel executives at four such companies General Motors, GMAC, American Insurance Group, and Citibank - to $500,000 a year until their loans are paid off. This may be the most popular element of the bailout - big shots at companies run into the ground having to take a government-ordered pay cut.
President Obama hopes to sign this bill as soon as it reaches his desk, but the Senate won't act on it until the first of the year. But seeing as how they financial system, as it is, was allowed to bring the economy to the brink, I don't see how it would be difficult for Senate Democrats to unite behind this bill, as sure as the Republicans in the upper house will unite against it.

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