Today, Congressman Jim Himes (CT-4) joined his colleagues in passing the historic Wall Street Reform and Consumer Protection Act of 2009 (H.R. 4173) to modernize the regulation of the American financial system. The bill contains strong measures to restore consumer confidence, increase transparency, control dangerous Wall Street excesses, and to eliminate the possibility that the American taxpayer will ever again have to bailout irresponsible private companies. Additionally, the Congressman successfully fought for provisions to assist small businesses, to ensure that certain commercial companies can continue lending to finance the purchase of their products, and to establish a privately-funded alternative to government bailouts.
"Maintaining a strong, safe and accountable financial system is vital to economic growth and jobs. For years, our regulatory system has been outclassed, undermined and outmoded, with disastrous results," said Congressman Himes. "The bill passed today, which I helped craft, balances the need to end the irresponsible behavior and risky practices that brought us economic meltdown with the importance of a robust financial services sector that extends credit, employs people, and pays taxes."
This new financial regulatory structure includes better protection for consumers, unprecedented transparency into derivatives trading, more competent oversight of Wall Street, and measures to eliminate the concept of "too big to fail." The legislation will end the predatory lending practices that occurred during the subprime frenzy and will protect investors with tougher and more accountable oversight.
The Consumer Financial Protection Agency (CFPA) will unite consumer protection rules under one roof. Currently, a variety of laws and the authority to enforce them are scattered throughout the regulatory structure, and no single entity determines whether products, features, or practices are unfair, deceptive, abusive, or unsustainable. The creation of the CFPA will, for the first time, establish a regulator tasked with the job of creating and enforcing one comprehensive set of rules to protect consumers. This consolidated approach will promote honest competition, protect the economy, and most importantly, provide a safety net for consumers. Moreover, this new agency will ensure that there is a quick response to emerging harmful practices, before they undermine a family's financial stability or become a systemic risk. To ensure small businesses are able to meet these new requirements with undue burden, Congressman Himes passed an amendment to create an Ombudsperson within the CFPA.
"We need clear rules that ensure consumers will have the tools they need to make smart decisions about the loans they take and the investments they make," said Congressman Himes. "We have rules that prevent dangerous drugs from being sold, that keep contaminated food off the shelves at the supermarket, and that keep our roads safe. Americans deserve the same protections for their personal finances."
Click here to watch a video of the Congressman calling for strong consumer protections.
In addition to protecting consumers, the financial reforms passed by Congress today will prevent the use of taxpayer dollars to bailout failed financial institutions. The bill establishes new procedures to unwind failing companies that pose a systemic risk and provides a mechanism to dissolve those firms using industry funds rather than taxpayer dollars. Congressman Himes passed an amendment to create a "contingent capital" plan that would require firms to effectively carry the insurance that would be used to unwind them should they fail.
Central to the financial crisis last year was the crash of the unregulated derivatives market, which, in its prime, was over six times the size of the stock market. During consideration of the bill by the House Financial Services Committee, Congressman Himes played a critical role advising his colleagues to ensure the bill's language would create a robust regulatory regime for products that Warren Buffet called "financial weapons of mass destruction". Congressman Himes drafted measures that increase transparency, encourage open market clearing and trading and protect the end users of derivatives for whom they are a crucial risk management tool.
Click here to watch the Congressman's floor statement on the importance of robust derivatives legislation.
Since coming to Congress early this year, Congressman Himes has helped lead the charge to create a new financial regulatory structure. As Co-Chair of the New Democrat Coalition's Financial Services Task Force, the Congressman helped craft a set of guiding principles that have been essential in the effort to establish a modern regulatory system that protects the ability of businesses and families to access credit.
"The financial crash of last year was largely the result of outmoded, delinquent regulation that had no hope of preventing the casino capitalism that gambled away our retirement funds and home values," said Congressman Himes. "The bill we passed today introduces unprecedented transparency, demands accountability, and enforces important rules that will prevent another crisis."
While this legislation is important, especially for some of Connecticut's biggest local employers, it is only one piece of the Congressman's effort to fix the economy and create jobs. The Recovery Act, health care reform, and mitigating the foreclosure crisis are all critical to turning the economy around. The last year has seen some encouraging signs. The non-partisan Congressional Budget Office just reported that the stimulus has saved or created between 600 thousand and 1.6 million jobs and raised GDP by 1.2 to 3.2%. Additionally, unemployment numbers released last week were much lower than expected. But the Congressman believes much work remains and will continue fighting for policies that create jobs and provide families and businesses with the economic stability they need and deserve.
"Since I came to Washington early this year, I've worked every day to turn the economy around and get us to a point where we're creating jobs again," said Congressman Himes. "We took a huge step forward today, but families are still struggling. This fight continues tomorrow."