What The Financial Bill Did And Didn't Do

House Financial Services Chairman Barney Frank and Senate Banking Chairman Chris Dodd i i

The financial legislation is named after Senate Banking Chairman Christopher Dodd (right) and House Financial Services Chairman Barney Frank, seen outside the White House on May 21. Susan Walsh/AP hide caption

itoggle caption Susan Walsh/AP
House Financial Services Chairman Barney Frank and Senate Banking Chairman Chris Dodd

The financial legislation is named after Senate Banking Chairman Christopher Dodd (right) and House Financial Services Chairman Barney Frank, seen outside the White House on May 21.

Susan Walsh/AP

The financial reform bill President Obama signed into law Wednesday will mean sweeping changes in the way banks and financial transactions are regulated. Obama has called the bill — which, among other things, creates a new consumer protection bureau, requires more oversight in the derivatives market and gives regulators more resources to look for risky moves in the financial industry — "the most far-reaching reform since the Great Depression."

But Republicans cast the bill as overreaching regulation by the government. Sen. Richard Shelby (R-AL) called the 2,300-page bill a "legislative monster" that will place "new regulatory burdens on businesses."

On today's Fresh Air, Binyamin Appelbaum, who covers finance for The New York Times, untangles the complexities of the Dodd-Frank bill — explaining how the measure was constructed, what aspects of the legislation still need to be hashed out by regulators and Congress, and what the bill will mean for consumers, businesses and large financial institutions.

"There were two ways the government could have proceeded in the aftermath of the financial crisis," he tells Fresh Air's Terry Gross. "One was to constrain the banking industry — to tell them that they could no longer engage in certain types of activities. ... That's what we decided not to do. The bill leaves the financial industry substantially intact. It allows [the financial industry] to do almost everything that they were doing in the run-up to the crisis. The difference that this bill makes is that we're hiring more lifeguards, in essence. We're putting more federal regulators around the pool, we're giving them more money, more power, more resources and hoping that they'll produce better results."

Binyamin Appelbaum

Binyamin Appelbaum covers finance for The New York Times. hide caption

itoggle caption

Interview Highlights

On concerns about increasing regulation

"We have a system that failed to protect us. The [regulators] — the Federal Reserve and the other banking industries [and the] Securities and Exchange Commission, they failed to protect consumers from a wide range of, in many cases, flagrant abuses in the middle years of this past decade. Loans that were being made without regard to how much money people could afford to repay, financial products that were being sold that were designed to fail and that buyers had not been told were designed to fail — all manners of shenanigans went on under the watch of regulators but without their intervention. And it raises real questions about why it is that they failed to see those things happening and why they failed to prevent those things: Was it because they lacked sufficient powers or there weren't enough regulators, or was it more fundamental? Was it a question of how those agencies are set up, how closely they tend to embrace the industry and adopt its perspective, and how good they are at seeing emerging problems?"

On what the bill does not do

"It does not roll back the ability for banks to cross state lines and establish branches in multiple states. It does not reimpose the caps on interest rates: on how much banks can pay to gather money from depositors or how much they can charge to give it out to borrowers. It does not restore the separation between Wall Street and commercial banking. ... Banks can still sell insurance. They can still operate investment banking units. And it does not restrict the various types of trading and gambling that have grown up in the interim."

On the difficulties of regulating the financial industry

"We've grown to a point where the financial industry is so much at the heart of the modern American economy that punishing it or even restraining it is very difficult to do. Punishing it or restraining it is essentially choking yourself. You need to have the confidence that that's the right thing to do and there's a long-term benefit to doing it, and thus far the judgment in Washington has been that it isn't — that the financial industry brought us to the dance, and we're going to leave with them."

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