Friday, May 21, 2010

More on the Wall Street Reform Bill

In my latest piece at the Guardian, I take a look at the passage of S.3127, the Restoring American Financial Stability Act of 2010:
Legislation usually becomes watered down as it winds its way through the maze of committee markups and amendments. But this bill got stronger as the process unfolded, particularly after the Goldman Sachs scandal involving mortgage-backed securities came to light. The firm's abysmal performance in front of a Senate committee reminded people why Wall Street needs adult supervision.
For instance, the bill incorporates the Volcker Rule, which restricts the ability of banks to trade on their own account. Unfortunately, repeal of the Glass-Steagall Act of 1933, which erected a barrier between commercial banking and investment banking never even got voted on.
Passage of the bill represents a clear victory for Obama and the Democrats, and a political problem for Republicans:
The effort to reform Wall Street has put Republicans in a tight spot. The party's traditional pro-business stance has been intensified by the Tea Party movement's antipathy towards Obama's activist approach to governing. Wall Street reform has created a conflict in the GOP between its growing libertarian impulses and its attempts to tap populist sentiment. For their part, Democrats will be more than happy to campaign on getting tough on Wall Street.

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