As Congress prepares for a joint conference to combine the financial reform bills passed in both houses last month, civil rights and labor movement leaders this week praised the effort and urged passage of the "most robust" reform package possible.
"The recent passage of Wall Street reform was an historic event and a victory for ordinary working Americans against the abuses of the big banks on Wall Street," said Nancy Zirkin, executive vice president of the Leadership Conference on Civil and Human Rights, on a recent conference call with reporters.
Zirkin offered praise for the bill, but urged Congress to "create the most robust final bill possible." She expressed support for the decision to televise the proceedings of the conference and called for publishing amendments to the conference report online before votes are taken.
The need for major Wall Street reforms arose out of the abuses in the housing market and its subsequent collapse, Zirkin explained. The civil rights community holds a special interest in the issue because of the disproportionate impact of the collapse of the housing market on communities and working families of color.
"For years Black and Latino families were purposely steered into taking subprime and predatory loans that they could not afford," Zirkin said. "Now these families and their communities are suffering the consequences rendered by unscrupulous lenders."
"Tens of thousands of families have lost or are losing their homes either to foreclosure because of the greed of too many lenders," Zirkin pointed out. As they now stand, both financial reform bills would protect homeowners from these practices, and a House provision that would help unemployed workers keep up with their mortgage payments and stay in their homes should be included in the final bill, she said.
Senate provisions that block lenders from using tricks to bump up interest rates or artificially inflate the prices of homes should be a part of the final bill, she added.
Consumer advocate Elizabeth Warren noted that one of the most important parts of the financial reform bill coming out of both houses is a strong Consumer Financial Protection Agency (CFPA) to oversee lending practices. "We want an independent agency, one with independent rule-making, a strong head of the agency, an independent budget, and no veto from banking interests," she said.
"We want an agency that doesn't have carve outs," she added. In other words, the final bill should prevent special interest groups from avoiding federal oversight and enforcement.
Both versions of the bill, Warren noted, "are designed to succeed." But there is little room for error and the congressional conference should bring the best features of the new CFPA in each bill to a final vote. "If we get a strong agency, the agency will make a real difference for families by making credit contracts comprehensible again and by weeding out the tricks and traps that have distorted the true cost of credit and the risks associated with many credit products."
Warren welcomed the strong support of President Obama and key congressional Democrats on this particular issue.
AFL-CIO Special Counsel Damon Silvers said the labor union supports financial reform that creates regulation of markets for what they are "rather than for what lawyers are able to call them." He said Americans are demanding reform that provides "a way of handling financial crises at very large institutions that doesn't involve simply pouring public money at them."
Financial reform should create "a way of winding down failure in a manner that is safe for the system but that holds people and businesses accountable for what they do in the financial markets," Silvers said.
New regulatory agencies should have the power to manage risk by preventing financial services corporations from becoming "to big to fail," he added. Public interests and resources should be protected and prioritized over the bonuses and profits of bankers, investors, and stockholders, he said.
The financial reform bill "makes substantial progress" in these areas, Silvers pointed out. The final bill might be improved by ensuring strong regulation of the derivatives markets, also known as "shadow markets." Derivatives trading should be governed by transparency, oversight, and ties to basic capital requirements.
Loopholes sought by bankers and investors should be eliminated. Consequences and penalties for failure to adhere to new regulations should be made strong and clear in the final bill. Insurance business and derivatives trading should be kept separate, or "fenced off," Silvers stated.
A public systemic risk regulatory body with authority to scrutinize and "wind-down" a financial institution that appears to be under threat, a provision in both bills, is a key reform needed in the final bill, he said.
An earlier measure in the Senate bill that would have required financial services institutions to pay up front for future bailouts rather than relying solely on taxpayers, was removed under Republican threats to filibuster the bill. "We regret that," Silvers remarked, "because it makes it much more likely that once again we would be back into tapping the public. We would prefer that the banks themselves pay up front for their systemic risk."
Cristina Martin Firvida, director of financial security at AARP, added that seniors want "Congress to establish new rules of the road that will hold the financial services industry accountable and crack down on abuses by big banks, the mortgage lending industry and the financial services industries." Above all, new regulations should safeguard retirement investments.
New regulations that would root out investment fraud and improper sales tactics by banks and financial services institutions aimed at seniors, Firvida noted, should be a part of the final bill.
Strong pressure from the civil rights and labor movement can ensure the best possible bill, the spokespersons agreed. Supporters of financial reform which holds Wall Street accountable for corrupt practices and creates new regulatory oversight should call or write Congress to make it happen.
