With President Obama’s signing of the Wall Street Reform and Consumer Protection Act on July 22, most Americans still know very little about the bill or what the legislation actually means (if they’ve even heard of it at all). But considering that the Act is 2,300 pages long and tackles the more complex issues of Wall Street reform, it is understandable why many are confused. Add to the fact that others still don’t understand what caused the recession over the past two years and perhaps you’re thinking President Obama should have sat down for a question and answer session rather than attend a flashy signing ceremony.
Also known as Wall Street Reform or Financial Reform, the act is considered one of Obama’s largest accomplishments after passing health care, and what he calls “the strongest consumer financial protections in history.” But how will a few pages of paper (or many, many pages in this case) lift us from one of the worst recessions we’ve ever seen? Have we seen any changes since it went into effect last month?
The most immediate problem the act addresses is the lack of regulations that allowed Wall Street to monitor itself over the past several years. Although extremely high banker salaries and high credit card fees led in part to the economy’s demise (and made most of the headlines) more complex issues like credit default swaps and derivatives trading also played a major role. It’s enough to make anyone’s head spin. But with Obama taking a stand to pass this legislation, it’s the first step in saying enough is enough. Change is here – so what does this change actually entail?
Other than making the US financial system more transparent, the law promises to help “real” people, and not just punish Wall Street executives, as some believe. With the new legislation Obama hopes to end overdraft fees, makes student loans easier to get and end abusive mortgage practices. This news comes as a relief to many who were victims of unfair rate hikes in addition to losing their jobs, savings and house values in the recession.
The act also created the Consumer Financial Protection Bureau and the Financial Stability Oversight Council, creating new protections for Americans and their tax money. Many believe it was the lack of these authorities before that lead to the financial crisis. Those worried about executive salaries will also be happy to know that shareholders now have a say on CEO bonuses, limiting some of the outrageous salaries of the past.
But just like with any large sweeping change, time is needed. With the act in effect for less than a month, the results are still to be seen. Many argue that this reform will hurt rather than help the economy and that many financial institutions will move somewhere with less regulation. How successful do you think the new legislation will be? What is the change, if any, you would like to see in Wall Street reform?
Posted by Rachel on August 11, 2010 at 4:21pm.
