The Glade 4.0

The mammoth legislative package -- which passed 223-202 with every Republican and 27 Democrats voting against the bill -- includes new fees, leverage limits and other restrictions on 'too-big-to-fail' financial institutions, a requirement to audit the Fed's balance sheet within two years, more say for shareholders on the pay of top executives and new investor protection safeguards.

The bill gave small public banks and corporations many exemptions from a substantial share of the new regulations.

The White House applauded the House action, saying that policies in Washington had played a large part in creating the financial crisis.

"The crisis from which we are still recovering was born not only of failure on Wall Street, but also in Washington," said President Barack Obama. "We have a responsibility to learn from it, and to put in place reforms that will promote sound investment, encourage real competition and innovation, and prevent such a crisis from ever happening again."

Lawmakers narrowly defeated a bipartisan effort to destroy a proposed Consumer Financial Protection Agency and replace it with a weaker council. The proposed consumer agency would supervise and regulate mortgage and credit card products including pay-day lenders and other lenders that have so far escaped regulation.

Rep. Steny Hoyer, D-M.D., the Democrat Majority Leader, spoke in defense of the creation of the consumer agency, arguing without it, bank regulators that failed to identify problems associated with subprime mortgages in the build up to the financial crisis, would stay in control of consumer protection.

"A major failure of the previous administration was regulatory neglect," Hoyer said, seeking to appeal to Democrats in the minutes before the vote on the council.

The package includes new supervision of trillions of dollars in complex derivatives products, new power to file suits against credit raters that have been blamed for overly rosy debt ratings and the creation of a council of regulators that would set capital standards for big banks and monitor systemic risk.

The package also requires big banks to pay into a $150 billion fund that would be used to dismantle a "too-big-to-fail" bank whose collapse otherwise would unsettle the markets. The fees would be used to make payments to creditors counterparties of the failed institution so that they wouldn't fail as well.

Muted support from the Treasury Department

Treasury Secretary Timothy Geithner commended the House for passing the legislation, but added that he and administration officials look forward to continuing their work with Congress to "strengthen key provisions" as the measure moves towards final passage.

Many provisions in the legislation matched proposals released by the administration earlier this year, but the Treasury Department's proposal would have preferred to set up a system to dismantle a large failed bank by first using taxpayer dollars that would be later recouped by fees assessed on the financial industry. Instead, under the approved legislation, bank regulator collect fees in advance from banks to cover the cost of dismantling an institution.

Bank reform legislation has been introduced in the Senate but is only expected to be approved next year.

Help for homeowners

Responding to concerns from the Congressional Black Caucus, lawmakers approved using $3 billion of bank bailout funds to give out fixed-rate, low-interest loans to unemployed people facing foreclosure and an additional $1 billion to give states financial incentives to buy abandoned or foreclosed homes and prepare them to become rental properties.

But a contentious measure referred to as the cram-down provision, giving bankruptcy judges the authority to modify mortgages to help troubled homeowners avoid foreclosure was narrowly rejected. Bank groups had lobbied heavily against the measure, with community bankers even threatening to pull their support for the entire bill.

"Allowing bankruptcy courts to cram-down principles will only lead to higher interest rates," said Rep. Lamar Smith, R-Texas. "Why should those who have done nothing wrong need to pay that price?"

Bigger fees, more rules

Dozens of other measures were approved, including one that grants the Federal Deposit Insurance Corp. the authority to make assessments on large banks and other big institutions to cover shortfalls from the bank bailout program within five years.

"Large financial institutions that caused the credit crisis will be required to make taxpayers whole," said Rep. Gary Peters, D-Mich.

The package also imposed sweeping new recordkeeping, reporting and trading regulations on trillions of dollars in derivatives transactions, with extra-stringent requirements for Wall Street traders who will be required to have much of their trades in the complex securities take place through transparent clearinghouses.

Lawmakers exempted commercial operating company end users from having their transactions go through clearinghouses, which are intermediaries between buyers and sellers.

Small businesses also received an exemption from accounting rules. Lawmakers defeated an effort to void a provision giving small public corporations relief from an audit requirement that dates from the post-Enron Sarbanes-Oxley Act. Over 100 Democrats voted in support of granting small businesses the relief.

Credit rating agencies under the gun

Credit rating agencies also were targeted by lawmakers. A variation of a measure introduced by Rep. Brad Sherman, D-Calif., which would alter the Securities and Exchange Act of 1934 to make it easier for investors to file lawsuits against credit rating agencies, was also included in an amendment approved Thursday night.

The measure would lower the liability standard for credit rating agencies from "knowingly or recklessly," to "gross negligence."

Fed audit in two years

A series of measures introduced by Rep. Michael Burgess, R-Texas, were also approved by the House, including a provision that would require the Government Accountability Office to conduct an audit of the Federal Reserve's monetary policy as well as how much the central bank has lent and will lend to specific banks within two years of when the legislation was approved.

The House Financial Services Committee in November approved a Fed audit bill introduced by Rep. Ron Paul, R-Texas., but had set no deadline for when the GAO must act.

Facism is not a school of thought, it is a racial slur.

Rep. Steny Hoyer, D-M.D., the Democrat Majority Leader, spoke in defense of the creation of the consumer agency, arguing without it, bank regulators that failed to identify problems associated with subprime mortgages in the build up to the financial crisis, would stay in control of consumer protection.

Perhaps these institutions and corporations Congress shouldn't have **** us all in the ear? We might not be here had they not pulled the shenanigans they pulled.

While housing prices were increasing, consumers were saving less[44] and both borrowing and spending more. Household debt grew from $705 billion at yearend 1974, 60% of disposable personal income, to $7.4 trillion at yearend 2000, and finally to $14.5 trillion in midyear 2008, 134% of disposable personal income.[45] During 2008, the typical USA household owned 13 credit cards, with 40% of households carrying a balance, up from 6% in 1970.[46] Free cash used by consumers from home equity extraction doubled from $627 billion in 2001 to $1,428 billion in 2005 as the housing bubble built, a total of nearly $5 trillion dollars over the period.[47][48][49] U.S. home mortgage debt relative to GDP increased from an average of 46% during the 1990s to 73% during 2008, reaching $10.5 trillion.

Facism is not a school of thought, it is a racial slur.

History has clearly shown that people will not bother to read or understand contracts, they want their gratification now and when the **** hits the fan they just walk away.

Xequecal:

Right, so we protect idiots from their own stupidity and give them the option to sue on bad outcomes. And you think this is a good thing?

You'll never get big by selling a quality product for a fair price.

define "fair" price... because I don't think you are using it correctly.

First of all, they're not idiots. There is significant peer and cultural pressure to not read contracts in the first place. Everyone assumes that there are government regulations that will protect you from anything truly abusive,

I admit that "fair" is pretty subjective, but the fact is most large companies in the US prey on the fact that their customers don't know much about what they're buying so they can be overcharged, sold inferior quality, or both. The vast majority of Bank of America customers could switch to a local bank or credit union and be better off in pretty much every substantive way, but they don't because they don't know better or have been duped by advertisers that small banks are risky or untrustworthy. I mean, AOL was the prime example. They got to charge triple the price for less services simply by dumbing the product down.

This is so true, and exactly what is wrong with American capitalism today.

Firms can engage in shady behavior if they don't intend on making repeated business. The fact of the matter is, consumers buy a product where they feel the quality meets the price. If they find the quality doesn't meet the price, they turn to a different product and a different firm for that product.

AOL was only charging $23.90 a month at a time when most ISP's were charging in the range of $14.99 - $19.99. It wasn't triple. It wasn't even double. They also charged this amount because they were one of the only providers you could access from pretty much anywhere in the country because they had access numbers all over the friggin place. AOL was only eclipsed because they didn't have an effective broadband strategy. Yes they had a lot of fluff, but they provided a service that was easier for the layman to jump into and feel comfortable. They provided parents easy to use tools to restrict internet access. There was a reason AOL was number 1 for so long and it isn't just because a lot of people were stupid.

The problem with this is a libertarian/personal responsibility economy requires you to be very knowledgeable about everything you are buying.

False.

That is why agents, proxies, and experts exist.

Yes, and businesses will do everything possible to prevent you from consulting with them. Have you ever gone shopping for anything at a place that caters to the lower-classes? Go to a poor area and try to buy a used car. Ask them if you can have a mechanic friend come look at the car before you buy it, or even bring along one of those OBD devices and ask if you can plug it in and run a diagnostic. Chances are, they will outright refuse. They simply do not want smart customers. Much more profitable to sell a lemon worth $1,000 to some guy for $5,000, which is of course financed with a $1,500 down payment into a 29.99% interest loan.

I mean, AOL was the prime example. They got to charge triple the price for less services simply by dumbing the product down.

Yes, and businesses will do everything possible to prevent you from consulting with them. Have you ever gone shopping for anything at a place that caters to the lower-classes? Go to a poor area and try to buy a used car. Ask them if you can have a mechanic friend come look at the car before you buy it, or even bring along one of those OBD devices and ask if you can plug it in and run a diagnostic. Chances are, they will outright refuse. They simply do not want smart customers. Much more profitable to sell a lemon worth $1,000 to some guy for $5,000, which is of course financed with a $1,500 down payment into a 29.99% interest loan.