June 27, 2010
United States House of Representatives
Washington, DC 20515
Re: Support for Passage of the Dodd/Frank Reform Compromise
Dear Representatives:
Americans for Financial Reform applauds Congress, especially Chairman Dodd and Chairman Frank, for moving forward with such significant legislation reforming Wall Street and holding the big banks accountable.
This Dodd-Frank Act represents meaningful progress from the depths of our financial crisis. The forces of the big banks were all aligned against Americans yet Main Street was able to win important battles.
We see landmark legislation when it comes to consumer protection, offering all of us an independent watchdog on our side. For the first time the $600 trillion derivatives market will be transparent and have to maintain capital to back up its bets – a move that was once thought unachievable. The adoption of the Volcker Rule represents a major change of direction, stopping banks from using insured deposits to support speculative activity. There are big steps in the right direction when it comes to registration of hedge funds and private equity, as well as improved protections for investors.
Americans for Financial Reform call on Members of Congress to support this bill and move to final passage immediately. This is a big step forward, and a first step toward the full array of changes we need to make sure Wall Street serves Main Street and not vice versa.
Below are some of the bill’s provisions that will improve the financial system for all Americans.
Landmark consumer protection: Consumers will now have an independent advocate on their side to prevent tricks and traps related to mortgages, payday loans and checking accounts. Credit cards and mortgages will offer terms in language we can all understand. It will also offer help for those abused by predatory lenders and limit banks from charging businesses hefty fees for debit-card purchases.
Shining Light on Shadow Markets: The $600 trillion derivatives market will now operate in the open, so regulators can catch problems – like the credit default swaps that brought down the economy – before they happen. Most deals will have to be backed up by a separate clearinghouse and traded on public exchanges. The participants will have to actually prove they have the money to cover their bets. In addition, hedge funds and private equity funds will have to register with the SEC and have regulators watching over them.
Preventing taxpayer bailouts: The government will have the authority to step in and safely shut down any failing financial firm, not just banks, instead of propping them up with taxpayer money. One regulator will be in charge of watching for emerging threats to the whole financial system – and will have the tools and authority to ensure those threats are actually visible.
Reining in the Wall Street Casino: Banks will be barred from gambling for their own account with our money. Banks will have to separate some of their derivatives trading operations into affiliates.
Mortgage reforms: For the first time lenders are prohibited from making loans that borrowers cannot repay, and banned from receiving kickbacks for steering people into high rate loans when they qualify for lower rates. Consumers are protected from abusive loan fees and penalties for prepaying.
Strong investor protections: Shareholders will have new tools to hold corporate boards and management accountable, including a voice on executive compensation decisions and an enhanced ability to nominate and elect corporate directors. Brokers will have to act in the best interests of their customers.
Holding Credit Rating Agencies Accountable: Credit rating agencies will no longer have a vested financial interest in giving high ratings to risky investments. Better controls will hold rating agencies accountable for the reliability of their reporting. Investors will be able to sue credit rating agencies who slap a high rating on a risky investment.
Opening the Fed’s books: The Fed’s emergency lending programs from the financial crisis will be audited to see where the money went. The Fed will also have to disclose loans it makes to banks through its discount window.
Banks Pay Up. The largest financial firms have to pay $19 billion to ensure oversight to prevent another financial crisis.
Americans for Financial urges Members of Congress to vote for final passage this week. Those who vote against this bill and prevent the American people from having our voice heard, are siding with Wall Street and their interests. Nearly two years have passed since financial crisis hit in September 2008; the Dodd-Frank Act’s landmark reforms need to be implemented immediately in order to protect Americans and create a more sustainable financial system.
Sincerely,
Americans for Financial Reform