Wall Street Reform and Consumer Protection Act of 2009
Posted by benarmstrong on 1/5/2010 10:39:31 AM.
This policy was first proposed by Rep. Barney Frank, House of Representatives.
Level of Government: National
Status: Proposed

Abstract
Background:
The House has passed a sweeping measure to address outstanding gaps in the financial regulatory system. The Bill is a direct response to the financial crisis derived in part from securities bundling and firms ‘too big to fail.’ Chris Dodd (D-CT) is championing the bill in the Senate.
Purpose:
To guard against systemic risk emanating from the financial sector; to begin regulating the over-the-counter derivatives market; and to restructure the regulations surrounding credit in order to prevent moral hazard. In short, the financial regulatory reforms are intended to prevent a financial crisis similar to that beginning in 2008.
Plans:
The Bill establishes numerous mechanisms to monitor and regulate organs of the financial sector.
 
It establishes a Consumer Financial Protection Agency that would identify and seek to regulate “abusive financial products and services.”
 
The new Financial Stability Council would identify and regulate firms that create untenable systemic risk, rendering them ‘too big to fail.’ The bill would afford the federal government limited authority to dissolve firms identified as ‘too big to fail.’
 
The new Federal Insurance Office would monitor the industries regulatory structure, relationship with the financial sector, and potential for systemic risk.
 
Establishes a process by which the Secretary of the Treasury can order “emergency stabilization actions” that can include the dissolution of a “financial company whose imminent or actual default would have serious adverse effects on financial stability or economic stability in the United States.”
 
Confers further authority for “financial crisis management” on the Federal Reserve Board.
 
Sets forth new regulations (in some case, the first regulations) on the over-the-counter derivatives market in order to increase transparency and reduce risk. The Bill requires that all such derivatives trades occur on an ‘exchange or electronic platform.’
 
The sweeping legislation also requires that shareholders have some voice on compensation decisions, and that hedge fund advisers register with the Securities and Exchange Commission so that they can be monitored and regulated.
 
Resources:
The Bill has yet to pass the Senate. Its implementation would require the establishment of at least three new governmental organizations: the Financial Stability Council, the Consumer Financial Protection Agency, and the Federal Insurance Office. The establishment of each office will require initial and continuing appropriations.

Policy Details
The House has argued that this measure represents the most sweeping regulation of the financial industry since the New Deal. It establishes regulations for over-the-counter derivatives, while creating an inter-agency council to guard against systemic risk. It also creates a Consumer Financial Protection Agency that would have the authority to regulate financial sector abuses, and a Financial Stability Board that would identify and seek to regulate firms deemed ‘too big to fail.’ It would also begin to regulate the insurance industry as it relates to the financial sector. The legislation will focus more regulatory power in an inter-agency body chaired by the Treasury Secretary, and in the Federal Reserve Board, which will be charged with handling financial crises.
Related Links
Key Documents for Financial Regulation Overhaul: The House Financial Services Committee has organized this web page of links to documents that explain the Wall Street Reform and Consumer Protection Act of 2009.
"Dems, Wall Street Water Down Financial Reform" (Business Week and MSNBC): The House Financial Services Committee has organized this web page of links to documents that explain the Wall Street Reform and Consumer Protection Act of 2009.
"The State of Financial Reform" (New York Times Editorial): This editorial outlines the Obama administration's progress on enacting new financial regulations as of October 2009.
Political debate over proposed consumer protection agency (NYT): The New York Times covers the potential compromise on the financial regulatory overhaul, which threatens a key pillar of the bill's reforms: The Consumer Financial Protection Agency.

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