In case you didn't hear: The Senate passed Senator Chris Dodd's financial reform bill on Thursday. Now it will be reconciled with the House version and then, presumably, be signed into law. There are plenty of people griping that it doesn't do enough, but over at Capital Gains and Games, Edmund Andrews has the glass-half-full take:
Despite absolutely relentless opposition from the banking industry, as well as from the Chamber of Commerce and other business groups, the bill would create a remarkably powerful new consumer financial protection agency. It would have the power to regulate mortgages, credit card fees, payday loans, car loans and most other big areas of consumer lending. It will also have examiners who are authorized to delve into bank operations.As far as I can tell, this is the same deal as with health care: It's not perfect, but it's a solid step in the right direction.
This is absolutely crucial, given how all the existing "prudential''' bank regulatory agencies utterly failed to halt subprime liar's loans or the even more evil pay-option adjustable rate mortgages, all of which were almost hot-wired to default when the housing market cooled down. Consumer protection is important not only for consumers but, as we learned the hard way, for the economy as a whole. The banks fought hard to park the new consumer authority inside one of the bank regulators, because those regulators are mainly concerned about the bank's financial strength. ...
Here's a second example of why this bill is strong. The Al Franken amendment, which for some reason Dodd apparently opposed, strikes a huge blow for reform of the credit rating agencies -- Moody's, Standard & Poor's. These were the firms that assigned AAA ratings to about $2 trillion worth of bonds and CDO's backed by explicitly nasty mortgages. That the agencies had been corrupted is beyond dispute, and the way in which they were corrupted isn't much of a mystery. They were earning a fortune from the firms selling all those securities, and they chased that business by finding ways to give the Wall Street issuers the ratings they wanted.