Washington, D.C.– Rep. Raúl M. Grijalva, co-chair of the Congressional Progressive Caucus, today applauded President Obama’s signing of the Wall Street Reform and Consumer Protection Act. Grijalva highlighted the law’s creation of the Consumer Financial Protection Agency (CFPA) as an especially important step toward preventing a future financial collapse and protecting consumers from predatory credit and mortgage practices.
“Our banks and investment firms should operate fairly and transparently,” Grijalva said upon final passage of the law. “The old system didn’t work, and anyone who argues otherwise needs to review what happened to our economy over the last 18 months. We need the kinds of reforms contained in this law not only to protect individuals and families, but to make sure that large institutions no longer threaten the health of the overall economy. This is the kind of landmark legislation we’ll look back on years from now and thank ourselves for passing.”
Other highlights of the new law include:
– Banning predatory lending practices that occurred during the subprime home mortgage frenzy.
– Creating new mechanisms that allow regulators to shut down “too big to fail” financial firms before they pose an unacceptable risk to the economy.
– Restricting large financial firms with commercial banking operations from making speculative investments.
– Increasing oversight and transparency for credit rating agencies, whose seal of approval gave way to excessively risky practices that led to the 2008 financial collapse.
– Reining in egregious executive compensation and retirement plans, requiring independent directors for corporate compensation committees, and limiting executive pay practices that incentivize risky bank behavior.
– Creating new protections for grocers, retailers and other small businesses facing out-of-control swipe fees that banks and other credit and debit card issuers charge for debit or prepaid-card purchases. Over time, this measure will save local merchants billions of dollars.
– Auditing the Federal Reserve’s emergency lending programs from the financial crisis and limiting the Fed’s emergency lending authority.
Importantly, Grijalva noted, the dissolution of a failing firm will be paid for first by shareholders and creditors, followed by the sale of any remaining assets of the failed company. Any remaining shortfall will be paid for by the financial industry: the law requires big banks and other financial institutions with at least $50 billion in assets to foot the bill for the failure of any large, interconnected financial institution posing a risk to the financial system, as AIG did in the run-up to the 2008 financial crisis.
“Cleaning up the mess left by the financial meltdown will take time, and this is a hugely important first step,” Grijalva said. “Maintaining the status quo is totally unacceptable. The American people need and deserve some confidence that regulators won’t let the economy collapse. This law puts in place many important standards that could have prevented the disaster we’re still trying to dig our way out of, and I thank my colleagues who supported it.”