One Step Closer to Reforming Wall Street

image: 

Recklessness on Wall Street brought our economy to the brink of collapse last fall. Unfortunately, the American people are still paying the price as we try and dig our way out of this recession.

Part of the reason I voted against the bailout of Wall Street last year was because it contained no reforms to our financial system. At the time, I called for serious reforms so that the actions that got our economy into this mess would not be allowed to happen again.

Now, over a year after the Congress passed the bailout, we are finally considering serious financial reforms. As I write this, the House of Representatives just passed the Wall Street Reform and Consumer Protection Act, which contains a provision I authored based on Maine law that reins in escrow company abuses. This bill, although it comes a bit late, is a substantial step in the right direction and long overdue.

While a lot of people get lost in Wall Street lingo like derivatives and systemic risk, the actual goal of the legislation the House passed is simple: to make sure that taxpayers are never again on the hook for Wall Street’s irresponsible behavior and bad bets. This is accomplished by putting an end to “too big to fail” firms and preventing their risky practices from threatening to bring down the entire economy.

While the reforms in that bill are praiseworthy and something I strongly support, many Mainers rightly want to know how the bill will benefit their daily lives. Fortunately, it takes a number of important steps to protect consumers.

The bill protects families and small businesses from predatory lending abuses, fine print, and industry gimmicks.

It ensures that the credits cards we use and the mortgages we sign are fair, transparent, and understandable by creating a Consumer Financial Protection Agency (CFPA). The CFPA will ensure that consumers are not put at risk due to fine print that often hides fees.

The bill helps protect 401(k)s and pensions by stopping institutions from taking risks that threaten the financial system and can cause a crash like the one that happened last fall.

The bill ends predatory lending practices so that lenders can’t put consumers into an unaffordable or difficult to understand loan.

And the bill makes sure that Wall Street banks have to play by the same rules when they provide the same thing, like a home mortgage loan. This will ensure that families can have faith that wherever they go, they can expect a minimum level of fairness.

All of these common sense changes are long overdue. The failure to regulate the financial markets let Wall Street and the big banks gamble with the American people’s money. This compromised the savings and retirements of millions. And it caused a ripple effect throughout our economy that we have still not recovered from.

Since then, Wall Street seems to have bounced back to a certain degree. Unfortunately, many on Main Street aren’t there yet.

We know from experience that Wall Street is not going to police themselves. The Wall Street Reform and Consumer Protection Act will finally begin to rein in the abuses that brought our economy to the brink of collapse. I am hopeful that the Senate acts soon so that we can begin to focus on policies that will create jobs and return our country to a path of fiscal health.

Mike Michaud represents Maine's Second District in the US House of Representatives.