House OKs Financial Overhaul Bill
MICHELE NORRIS, host:
It's been a year since Congress approved the multibillion dollar bailout. Today, the House of Representatives passed legislation in hopes of preventing future bailouts. The bill would create an agency to protect consumers from abusive credit practices and it would establish a council to get a handle on companies considered too big to fail.
NPR's Audie Cornish explains.
AUDIE CORNISH: You might be hearing about how some of the financial institutions that accepted government bailout money last year are beginning to pay it back. That's impressed some, but many in Congress still consider Wall Street the big bad villain in the story of the economic crisis. Michigan Democrat John Dingell.
Representative JOHN DINGELL (Democrat, Michigan): We here have a chance to begin again to protect the American people from the rascality that goes on with a bunch of sharp-shooting MBAs interested only in grubbing money and not caring about the free financial system which we have here.
CORNISH: Rascals, the wild west, watchdogs, referees, the metaphors were all over the place. But the goal was clear: prevent the market abuses that contributed to the industries' near collapse and avoid haphazard bailouts. The House approved the financial industry overhaul by a vote of 223 to 202.
What's in it? First, the bill proposes a council of regulators empowered to monitor the system for threats. It could impose restrictions on companies considered too big to fail, and dismantle the ones on the verge of collapse. But the new fund established to cover the cost sounds too much like what we have now, says Jeb Hensarling of Texas, who supported a GOP alternative.
Representative JEB HENSARLING (Republican, Texas): The only reason to have a bailout fund is to bail people out. The Republican bill says we're tired of the bailouts. You cannot have a system where you privatize your profits and socialize your losses.
CORNISH: Instead, GOP lawmakers like Shelley Moore Capito of West Virginia lobbied all week to create a new chapter of the bankruptcy code to deal with mega firms.
Representative Shelley Moore Capito (Republican, West Virginia): The American public understands bankruptcy. These institutions understand bankruptcy and this is where they should be if they do indeed find themselves failing. They should be able to fail.
CORNISH: Massachusetts Democrat Barney Frank, the bill sponsor, says this time the bailout fund would be paid for by financial companies, not taxpayers. And Frank says bankruptcy wouldn't work.
Representative BARNEY FRANK (Democrat, Massachusetts): We don't think it is responsible for the society to say, go ahead and fail, we don't care. We do care. We're not going to go to their aid the way it was done last year, but we think you should step in and don't let them get to that point.
CORNISH: The bill also tries to rein in some of the financial excesses blamed for the crisis. Hedge funds and the derivatives market would be subject to new restrictions and more monitoring. The federal regulators that Democrats accuse of ignoring consumers would see some of their powers taken away and given to a new consumer financial protection agency. It would write and enforce rules for mortgages, credit cards and more.
Representative MAXINE WATERS (Democrat, California): This new agency's role will be to spot the next subprime crisis before it starts and prevent the next predatory product from stripping consumers of their homes and their wealth.
CORNISH: That's California Democrat Maxine Waters. She is a member of the Congressional Black Caucus, which threatened to withhold its support and want a provision to help unemployed homeowners facing foreclosure. Meanwhile, more than 65 conservative Democrats leveraged their voting power to limit the state's ability to impose consumer regulations on big banks. These tensions within the party spotlight the difficulties to come in the Senate, which is expected to take up similar legislation next spring.
Audie Cornish, NPR News, the Capitol.
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