House Approves Landmark Wall Street Reform

Legislation brings responsibility, accountability, and transparency to financial markets while creating enforcement agency to protect consumers

The House of Representatives passed today a comprehensive set of measures to put in place an orderly resolution process for failing financial institutions and create a consumer financial protection bureau. The package of reforms addresses the myriad causes -- from predatory lending to unregulated financial trading -- that led to the 2008 financial crisis. The Wall Street Reform and Consumer Protection Act passed by a vote of 237 to 192.

"Almost two years ago, this House was faced with painful dilemma: risk the collapse of our financial system and a second Great Depression, or take action to stabilize financial markets," said Rep. Levin. "This comprehensive financial regulatory reform will help to ensure that we are never again forced to choose between bailing out banks and saving our economy. Additionally, the legislation creates strong consumer financial protections to end predatory lending, prevent deliberately misleading "disclosures' and end other industry abuses."

In the run up to the financial crisis, rampant speculation, and in some cases fraud, in the residential housing and mortgage markets combined with an explosion of complexity in the financial markets to create a bubble that when it burst, rippled through the entire economy. The financial crisis that began in 2008 was the worst since the Great Depression and was enabled and made worse by a lax regulatory environment that for many years failed to properly supervise financial markets and control the risks Wall Street was creating.

To prevent this from happening again, the bill creates a council of regulators to monitor and regulate financial institutions, whether they are banks or not, that are so large or interconnected that they pose a systemic risk to the financial system. In the event of a failure of such an institution, the Council would have the authority to break up or liquidate the firm under a resolution process overseen by the FDIC.

The legislation also establishes a Bureau of Consumer Financial Protection within the Federal Reserve with rule-making authority over most consumer financial products, and direct examination and enforcement authority over mortgage-related businesses, banks and credit unions with assets over $10 billion, pay-day lenders and others.

The bill has been called the "strongest set of Wall Street reforms in three generations" by Elizabeth Warren, Chair of the nonpartisan Congressional Oversight Panel, and has been endorsed by the AARP, Consumer Federation of America, Consumers Union, Council of Institutional Investors, National Fair Housing Alliance, National Restaurant Association, Public Citizen, SEIU, and US PIRG, among other organizations.

The legislation must now be approved by the Senate.

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