A plan to overhaul financial regulations in Congress is receiving differing opinions from lawmakers from Idaho. Democratic U.S. Rep. Walt Minnick voted for the plan, saying that there’s more good than bad in the plan, and that some of the safeguards it puts in place could prevent some of the problems that led to the 2008 Wall Street bailout.
The financial reform plan still needs a final vote in the U.S. Senate before heading to President Barack Obama’s desk. Idaho’s three Republicans in Congress have voted against the plan. Sen. Mike Crapo served on a committee that merged similar House and Senate plans, and is opposed to the finished product.
The legislation in Congress changes how the federal government watches over the financial sector in several ways. It sets up a new consumer protection bureau within the Federal Reserve that would monitor mortgages, credit cards, loans, and other financial products to prevent deceptive and abusive practices. It also would allow the government to break up and liquidate insolvent large banks and financial institutions using funds from fees on those institutions, rather than taxpayer dollars. New regulations on derivatives, a type of investment product, would also become law.
Crapo said that while he thinks passing the plan is a bad idea, he said there’s a good chance the Democratic-led Senate will approve the plan.
Minnick said he thinks the Senate should approve the reforms by the end of July. He agreed with some of Crapo’s concerns about the plan. He said consumers need more protection from financial predators, but that the new bureau is a large growth of government. “It would have been much more sensible to beef up the consumer regulation responsibilities and leave it with the existing regulators, rather than create a new bureaucracy,” Minnick said.
Minnick also agreed that because the plan doesn’t include Fannie Mae and Freddie Mac, government- -created companies that finance home mortgages, there’s unfinished business left for Congress to tackle. He said that would be part of the next financial reform plan that could be introduced in the next year.
However, Minnick said the legislation will help the free market of the U.S.’s financial sector work better, and that government regulators could prevent massive risks and failures like those that led to the 2008 housing crisis and economic recession.
“We’ve got a structure which will hopefully keep institutions from getting in trouble, but if they do anyway, it will allow them to be wound down in an orderly fashion, so the loss is shared by the stockholders and the lenders, but not the taxpayers,” Minnick said. “It’s not perfect, but it’s better than having nothing.”
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