What the Law Does: Wins and Losses

This page contains win-loss information for all topics.  To see details on one issue area at a time, use the links below.

Read all our posts about the final bill here.

Nearly two years after Wall Street crashed our economy, and after a year of work, the House and Senate are finally ready to vote on a comprehensive package of Wall Street reforms. When we began this effort we agreed that any legislation we support would have to hold Wall Street accountable, reverse the years of de-regulation and rein in the reckless behavior of the big banks and the predatory lenders.  Americans for Financial Reform believes this bill is very significant and goes far toward achieving these goals.  It is also a basis on which we can build for greater reform in the future.

The bill will include a tough, new set of consumer protection rules and enforcement of those rules to replace the system that failed so egregiously in cracking down on the sleazy practices that led to the financial crisis. We got that.

We agreed that in order to restore stability to our financial system and keep something like this from happening again, we need to dramatically increase both oversight of the markets as a whole and by extension, transparency – particular in those areas that had been virtually unregulated, notably in the derivatives market. We also wanted to make sure that there were capital requirements to back up these trades. We got that.

We needed new safeguards and protections from the risky behaviors that led to the bailout of billion-dollar banks. We got those.

We wanted greater protection for investors and more democracy in corporate governance.  We got that.

None of this is to say that we got all that we wanted. The forces arrayed against us were spending $1.4 million a day to chip away at what we won piece, by piece, by piece. They were successful far too often. They carved loopholes that will make the protections less effective than they should be. They won special-interest carve-outs that defy logic.  They stood in the way of structural changes we need.

There is more to be done—on foreclosure, on limiting the size of the too big to fail banks, on creating a financial speculation tax, on democratizing the Federal Reserve.  But this is a significant start.

All of that said, Main Street won a series of important and hard fought battles in this bill.  And the people on Main Street face a more stable economic future as a result. This was a win.

The following pages give more detail about what we believe we won, we lost and where there were compromises.  This is so we can both appreciate the real victories that organizing has helped to achieve and to outline some of the struggles that still lie ahead.

In a landmark win for Main Street, the financial reform bill will result in substantial new protections for consumers from the tricks and traps in personal financing that indirectly and otherwise led to the financial crisis.  The resulting Bureau has the independence and authority it needs to get the job done. Whatever compromises were made does not change the overall significance of this victory for consumers.


What We Won, What We Lost


  • We won: The agency will be led by a director appointed by the president and confirmed by the Senate. It is housed in the Federal Reserve but not subservient to it. That is consistent with the original vision for the agency.
  • We compromised: The bureau’s rules could be overridden by the new Financial Stability Oversight Council if the panel decided that they threatened the safety, soundness or stability of the U.S. financial system.


  • We won: the bureau will write consumer-protection rules for banks and other firms that offer financial services or products. It will enforce those rules for banks and credit unions with more than $10 billion in assets. This includes, for example, the authority to require credit-card issuers like Citigroup to reduce interest rates and fees, or mortgage lenders to give clear information to borrowers.
  • We lost:
    • CFPB does not have examination or enforcement authority over smaller banks and financial institutions
    • CFPB does not have blanket authority to step in if prudential regulators fail to do their jobs with regard to small banks and financial institutions.

Funding for Bureau
Reformers wanted to ensure the Bureau’s funding was not dependent on the appropriation process, which is unstable.

    • We won: Upon request of the director the CFPB gets a percentage of the total operating expenses of the Federal Reserve System. The agency can also request up to $200 million more through the appropriations process.

Specific financial products and practices

Private student loans:

These are some of the sketchiest financial products out there. These loans have typically been variable rates with no cap, no deferment options, no affordable payment plans, no loan forgiveness programs, and no cancellation rights in the cases of death or disability that federal loans provide.

  • We won:
    • The CFPB will write rules that apply to all private student loans, including those made by nonbanks like Sallie Mae, by big banks and by career colleges that offer private loans. CFPB will enforce those rules for all private loans provided by all nonbanks and by banks with more than $10 billion in deposits.
    • The bill creates a Private Student Loan Ombudsman, which will help borrowers, analyze complaints and make policy recommendations to Congress and the Administration.  This will be the time even the most basic data about the private student loan industry is collected.
  • We compromised:
    • For small banks and credit unions, their current regulator will be responsible for enforcing the CFPB rules.  Sallie Mae currently makes its loans through Sallie Mae Bank, which has under $10 billion in assets, so its current regulator will enforce the CFPB rules with regard to the bank, although the CFPB will do so with regard to Sallie Mae itself.
    • The House bill required private student lenders to confirm with the school that the borrower is eligible to borrow the requested amount, and that the borrower has been notified of any untapped federal loan eligibility. This did not make it into the final package, but the CFPB may still be able to use its authority to require lenders to get these confirmations.


Forced arbitration clauses are hidden in the fine print of consumer and investment contracts and strip the consumer and investor of the right to file claims against major Wall Street firms, instead funneling those claims in an unaccountable and biased private system.

  • We won:
    • The SEC and CFPB can ban forced arbitration within their respective jurisdictions.
    • Forced arbitration in residential mortgages is banned outright.
  • We compromised: The CFPB must study the issue first before instituting a ban

Auto loans:

Most car dealers make the bulk of their profit not from the sale of the cars but from financing – much of which is not advantageous to the buyer. Tricks and traps abound

  • We lost: Amazingly, car dealers – the least trusted most complained about businesses in most states – managed to win an exemption from oversight by the CFPB
  • We compromised: The Federal Trade Commission, which currently regulates car dealers, can now operate under a much quicker and simpler procedure for making rules related to auto financing

Swipe fees

Visa Inc. and MasterCard Inc., the world’s biggest payments networks, set interchange rates and pass that money to card- issuers including Bank of America and JPMorgan. Interchange is the largest component of the fees U.S. merchants pay to accept Visa and MasterCard debit cards. The fees totaled $19.7 billion and averaged 1.63 percent of each sale last year

  • We won:
    • The Federal Reserve will get authority to limit interchange, or “swipe” fees that merchants pay for each debit-card transaction. Retailers can refuse credit cards for purchases under $10 and offer discounts based on the form of payment.
    • Merchants will be able to route debit-card transactions on more than one network, which will provide competition ina previously non-competitive market.
  • We compromised:
    • The bill exempt lenders with assets of less than $10 billion, or 99 percent of U.S. banks.
    • Electronic benefits transfer (EBT) and other prepaid cards are also exempted


Credit-ratings agencies had been held up historically as neutral arbiters of risk. That turned out to be far from the truth, as evidenced by the numerous mortgage-backed securities and other risky securities that states and municipalities in particular bought because they had been slapped with a AAA rating – meaning they were supposed to be virtually risk-free. The problem was that credit rating agencies made money by giving their customers the ratings they wanted. There was little or no accountability for the agencies because it was nearly impossible to sue them.

Here’s how the Wall Street reform bill addresses credit rating agencies.

What We Won, What We Lost

Rules & Oversight

  • We Won:
    • For the first time, the SEC will have an Office of Credit Ratings to keep a watchful eye on the rating agencies’ critical role in our financial system.  The Office will have the authority to write rules and levy fines.
    • The SEC will have a new mandate to examine rating agency operations.
    • Credit rating agencies will be required to disclose the data and methodologies used in their ratings, as well as ratings performance.
    • The SEC will have the authority to deregister an agency for providing bad ratings over time.
    • Raters must meet standards of training, experience, and competence, and be tested.
    • The SEC shall issue rules to prevent sales and marketing considerations from influencing the production of ratings.
    • Raters will have to take into consideration credible information that comes to their attention from a source other than the organizations being rated.
    • Credit rating agencies are explicitly prohibited from advising an issuer and rating that issuer’s securities.
    • The bill eliminates the credit rating agency exemption from the Fair Disclosure rule which provides that when an issuer shares important nonpublic information with certain parties, now including rating agencies, it must make public disclosure of that information.
    • The bill replaces the term “furnish” with “file” in existing statute.  Information that is “furnished” to the SEC is subject to a lower standard of accuracy and liability than information that is “filed” with the SEC.

Conflict of Interest

  • We won: The SEC will create a new mechanism to prevent issuers of asset-backed securities from picking the agency they think will give the highest rating.  Unless a stronger mechanism is identified in the SEC study, an independent, investor-led board will assign rating agencies to provide initial ratings of asset-backed securities.
  • We compromised: The SEC will be given two years to study the conflict of interest caused by securities issuers picking and paying their credit rating agencies before they begin assigning rating agencies.


  • We won:
  • Investors will now be able to recover damages in private anti-fraud actions brought against rating agencies for gross negligence in the rating.
  • Registered credit rating agencies will no longer be exempt from expert liability under the securities laws.  The SEC originally exempted rating agencies from liability to encourage reliance on credit ratings in the registration of securities.  Eliminating the exemption is consistent with the bill’s goal of reducing such reliance.
  • The bill clarifies that ratings are not forward-looking statements entitled to special protections from liability.

Universal Ratings

  • We won: Raters must apply ratings consistently for corporate bonds, municipal bonds, and structured finance products and instruments, based on probability of default.

Reliance on Ratings

  • We compromised: All federal agencies will review their rules and regulations and eliminate all references to credit ratings.  We support a reduction in the over-reliance on ratings, but a sufficient alternate standard of creditworthiness will need to be found for some federal rules.

Rating Agency Governance

  • We Won:
    • At least half of a credit rating agency’s boards of directors must be made up of independent members with no financial stake in credit ratings.
    • When a rating analyst switches jobs, the analyst’s ratings will be reviewed and the job change will be made public.
    • Compliance officers isolated from the rating and sales business will be required to file reports on rating agencies’ adherence to rules.

Post-Rating Surveillance

  • We lost: The final bill did not include a requirement that credit rating agencies monitor and update ratings as market conditions change.  However, the initial rating assignment mechanism will take into account long-term rating performance.

Public Rating Utility

  • We lost: Many reformers believed that the best way to solve the problems associated with credit ratings agencies was to create a public agency. This was never really given serious consideration in either the House or Senate.


Selling over-the-counter derivatives is among the most lucrative businesses for the largest financial companies. U.S. commercial banks held derivatives with a notional value of $216.5 trillion at the end of the first quarter of this year, according to the Office of the Comptroller of the Currency.  JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp., Goldman Sachs Group Inc. and Morgan Stanley hold 97 percent of that total.

All this trading was done on an unregulated market.  It was the ultimate financial free-for-all, with no rules, no limits and no one minding the store.  When reality caught up with the housing market, these unregulated derivatives helped bring down companies including Lehman Brothers and forced the bailout of systemically dangerous financial institutions like AIG.

Here’s how the Wall Street reform bill addresses derivatives trading.

What We Won, What We Lost


Clearing requirements will ensure that trades are processed through third-party clearinghouses that guarantee payment in case of default and require parties to have cash to back their bets.

  • We won: Despite tremendous pressure from special interest groups claiming they should be exempt from clearing requirements, it is estimated that the conference report will require around 90% of standard derivatives to clear. This means that once the bill is passed large banks, insurance companies, hedge funds and other financial institutions will be required to submit standardized swaps to clearinghouses and post margin to back their bets. The only exemptions from the clearing requirements are for commercial companies like airlines and home heating oil distributors and other small players in the derivatives market who are legitimately hedging risk.


Currently, over-the-counter (‘OTC’) derivatives are considered private contracts. There is no way for regulators to analyze all the derivatives activity going on in the system and determine whether there is risk to the system. There is also no way for derivatives users to determine whether they are getting a fair price.

  • We won:
    • Derivatives will be traded on an open, regulated exchange or “swap executive facility” much like the New York Stock Exchange.
    • Regulators will have the information they need to oversee risky activities and prevent fraud.
    • Market participants will also be able to access a constant feed of real-time pricing data for standard derivatives that will allow them to shop around for the best deals on derivatives so they can manage price fluctuations in products they use in their day-to-day operations.

Derivatives Enforcement:

    • We won: Regulators have authority to take action if a clearing house refuses to accept a transaction that regulators have determined must clear.
    • We compromised: The only limit on regulators’ authority is that they cannot force a clearinghouse to accept a swap for clearing if it would undermine the financial integrity of the clearinghouse or create systemic risk.

Foreign Exchange Swaps

    • We won: Foreign exchange swaps are required to clear and trade unless the Secretary of Treasury makes a determination that they should not. This determination must be based on a variety of factors including whether comparable regulation is in place and whether regulating these trades could result in systemic risk. In addition, if the Secretary of Treasury determines that clearing and trading are not required, he must report to Congress. All federal financial regulators will also be required to write rules to protect retail investors in this market.

Cap on banks’ clearinghouse ownership

    • We compromised: The SEC and CFTC have authority to set a hard cap on clearinghouse ownership so big banks can’t use their ownership interests to force standard swaps to be done in the unregulated markets that are more profitable for the biggest banks.
    • We lost: Reformers wanted a set standard – big banks couldn’t control more than 20 percent of voting interests in a clearinghouse, period.
    • We won: Regulators will have the authority to put rules in place that can prevent the conflict of interest that exists when the same people who profit from unregulated trades participate in the decision whether trades should be conducted in the less profitable regulated markets. This may include hard caps on banks’ ownership interest in a clearinghouse.

Fiduciary duty for swaps dealers

    • We lost: The Senate bill gave swaps dealers a fiduciary duty to pension funds and municipalities. The conference report weakens this duty, creating a loophole that says the fiduciary duty exists when the broker is acting as an adviser, but in comparable provisions under existing law that apply to securities broker-dealers, a broker-dealer is almost never deemed to be acting as an adviser.
    • We won: The bill provides business conduct standards and disclosure requirements for swaps dealers when they do business with pension funds and municipalities.

Swaps desk spin-off

    • We won: The Senate-passed bill required taxpayer-backed institutions to
      spin off their swaps desks so no taxpayer money could be at risk, ever. That provision was weakened in conference to apply to only between 3 and 20 percent of swaps activity and to force the desks into a separately capitalized subsidiary. It does, however, include the riskiest activities including some of those most associated with the crisis – such as a credit-default swaps in which companies like AIG sold insurance on their bets to companies like Goldman Sachs without having to prove they had the money to pay if the bets went bad.
    • We lost: The conference report provides that banks may continue to deal in swaps if they pertain to “permissible assets”, as defined in current banking law. Swaps based on permitted assets include swaps based on interest rates, currency, gold and silver. Insured institutions will also be permitted to trade cleared, investment grade CDS. That could leave 80 percent or more of the activity on swaps desks still under the auspices of taxpayer-backed institutions.


What We Won, What We Lost

Fiduciary Duty

  • We won:
    • The SEC has the authority to insist that brokers  have a fiduciary duty to their clients – meaning that your investment advisor will have to give you advice that is best for your portfolio and financial future – not theirs.
  • We compromised:
    • The SEC must first conduct a six month study before issuing rules.

Stronger SEC rules and protections

  • We won:
    • Investor Advocate position at the SEC who will identify the most significant problem areas investors encounter with securities industry practitioners and products and ensure that investor concerns are incorporated into SEC rulemaking decisions.
    • Improved disclosure to investors.  SEC has new authority to test rules or programs by gathering information and communicating with investors and other members of the public.  This type of testing has the very real potential to improve the clarity and usefulness of the disclosures that our securities regulatory scheme relies upon.  The legislation also includes a study of financial literacy and clarifies the SEC’s authority to require disclosure before the purchase of certain investment products.
    • Strengthened  SEC enforcement tools.  This extensive package of new tools includes or clarifies authority for the Commission to
      • bring aiding and abetting cases under all of the securities laws;
      • authorize nationwide service of subpoenas;
      • impose sanctions on individuals who commit violations while associated with a regulated entity but who are no longer associated with that entity; ,
      • go after wrongdoers who harm U.S. investors no matter where the fraud is based or who commit significant acts in furtherance of a fraud within the United States, even if the victims are located elsewhere.
  • We lost:
    • Weakens protections against accounting fraud.  The conference report incorporates three provisions that undermine the Sarbanes-Oxley Act’s protections against accounting fraud by carving exemptions out of the law’s requirement that the financial statement audits of all public companies include an evaluation by the auditor of the company’s internal controls to prevent accounting fraud and promote accurate financial reporting.
    • Equity-indexed annuities oversight loophole. Equity-indexed annuities are exempt from securities regulation and oversight.  Equity-indexed annuities are hybrid products that include elements of both insurance and securities, but are sold primarily as investments. Preventing the SEC from adopting appropriate regulations to supplement state insurance department oversight will deny investors needed protections from one of the most abusively sold products on the market today.

Corporate governance:

  • We won:
    • Proxy access:  The SEC will adopt rules under which shareholders would be able to nominate directors using the company’s proxy
  • We lost: Majority voting for directors of corporate boards— Reformers supported a Senate provision that was taken out of the final bill that would have required directors to be elected by a majority of votes cast to ensure that shareowners’ votes count and make directors more accountable to the company’s owners.

Executive Compensation


  • We won:
    • Say on pay The bill requires  a non-binding shareholder vote, at least once every three years, to approve the compensation of named executive officers at annual or other shareholder meetings for which the SEC requires compensation disclosure, and a non-binding vote, at least once every six years, to determine the frequency of say-on-pay votes. 
    • Disclosure of say-on-pay and golden parachute votes The bill would require certain institutional investors to disclose how they vote with respect to company proposals regarding say-on-pay, frequency of the say-on-pay vote and golden parachute compensation.
    • Shareholder approval of golden parachute compensation The bill includes new disclosure and shareholder approval provisions relating to “golden parachute” arrangements.  Specifically, the bill would mandate disclosure on the proxy of any compensation arrangement with a named executive officer, including the aggregate amount of the potential payments, if the arrangement is based on or related to the M&A transaction.  In addition, the bill would require a non-binding shareholder vote with respect to any such arrangement, unless previously subject to a say-on-pay vote.
    • The Compensation Committee and its Advisors The bill would require compensation committee members to satisfy independence standards to be established by the stock exchanges.  In addition, a compensation committee could engage compensation consultants, legal counsel or other advisers to the compensation committee only after considering factors to be promulgated by the SEC that might affect the independence of such advisers.  Finally, the bill would authorize compensation committees to retain independent advisers and would require the committees to oversee the advisers they retain.
    • Clawbacks.  The bill would require companies to adopt a clawback policy applicable in the event of an accounting restatement due to material noncompliance with financial reporting requirements and providing for the recovery of amounts in excess of what would have been paid under the restated financial statements from any current or former executive who received incentive compensation (including stock options) during the 3-year period preceding the date of the restatement.
    • Additional Disclosure. Additional requirements on proxy disclosures include
      • whether the compensation committee has retained a compensation consultant whether the work of the compensation committee has raised any conflicts of interest,
      • demonstrating the relationship between executive compensation and financial performance,
      • the ratio between the CEO’s compensation and the median compensation of all other employees
      • whether employees or directors may engage in hedging transactions on company stock.
  • We compromised:
    • Earlier versions of the bill required an annual say-on-pay vote.
    • The say-on-pay vote is non-binding


Under current law, there is no single body designated to look at the “big picture,” and head off financial crises like the crash of 2008 and major non-bank players in the financial market operated in the shadows without any government oversight.

Here’s how the Wall Street reform bill changes the status quo.

What We Won, What We Lost

  • We won:
    • Systemic risk monitoring: A new “council of regulators” will both monitor system-wide risk  and advise the Federal Reserve Board – the current primary systemic risk regulator.
    • Oversight and limits: For the first time, there will be higher capital, leverage and liquidity standards on the biggest, riskiest financial firms, as well as bank-like oversight for large “shadow bank” financial companies like AIG and the mortgage financers that were at the center of the crisis.
  • We lost: There remains an unnecessary loophole, inserted in the Senate at the last minute that unnecessarily allows any financial firm that is just 16 percent commercial to escape oversight from the systemic risk council, no matter the threat the firm could pose to the economy.

“The Volcker Rule”
The so-called “Volcker Rule” ensures that banks do not make risky “proprietary” bets for their own accounts with taxpayer-backed deposit funds and limits investment in private funds.

  • We won:
    • The Volcker rule was not in the House bill at all. In the Senate-passed version, regulators had wide authority to define proprietary trading. The conference report tightens the definition, narrows exemptions and makes the rule a law, not able to be undone by future regulators.
    • It also includes language banning Goldman-style conflicts-of-interest wherein Wall Street firms package risky securities for customers and then bet that they will fail.
  • We lost:
    • Long before the conference, efforts to limit the size of banks, as in the Brown-Kaufman amendment, or fully separate Wall Street speculation from Main Street banks with a new Glass-Steagall, were defeated.
  • We compromised: Sen. Scott Brown was able to win a classic special-interest carve-out that allows banks to trade using private-equity and hedge funds, though they will be limited to investing no more than 3 percent of bank capital and own no more than 3 percent of the fund.  But we won key safeguards protecting taxpayers from the danger of Sen. Brown’s carve-out: banks will have to hold in capital reserves every dollar that they invest in hedge funds and private equity funds. Additionally, banks cannot bail out their funds.

Taking on Bank Risk:

  • We won: The final bill ensures that firms don’t become too exposed to any single financial counterparty or to their own affiliates.  Also, banks will have to hold capital in reserve that reflects all the off-balance sheet debt they could potentially be responsible for in the event of a crisis.
  • We compromised: The final bill includes delayed implementation of rules to improve the quality of capital that banks have to hold and ensure that leverage and capital standards are higher in the future than they are today.
  • We lost: The House would have required systemically-risky financial companies to hold at least $1 in capital for every $15 in debt. The conference turned that reasonable leverage ratio into a discretionary standard the Fed could impose only if the systemic risk council finds that the firm poses a grave threat to the economy.

Providing an Alternative to Bailouts with Resolution Authority:

  • We won:
    • The bill expands the FDIC “resolution authority” – the authority to dismantle failing banks – so that the government can safely shut down not just depository banks, but shadow banks like AIG or the conglomerates that own banks (like Citigroup). This will be critical to containing the next financial company failure and providing an alternative to bailouts.
    • To pay for costs associated with the entire bill, the conference originally included a risk-based assessment on large hedge funds and Wall Street banks, to be used in the event of liquidation or, after 25 years, to pay down the national debt. In other words – those that caused the mess will pay to clean it up. Republicans protested, the conference report was reopened, and fee was changed so costs associated with the bill would now be paid for by a combination of TARP funds and an increase in premiums big banks now pay the FDIC
  • We lost: The House bill included a $150 fund paid for by the big banks that would protect taxpayers from the cost of shutting down a large, failed financial firm. Opponents of reform grabbed onto the liquidation fund as a talking point – claiming, nonsensically, that this industry-paid fund for shutting down firms was a “bailout fund”.
  • We compromised: The fund was replaced by a line of credit from Treasury to be repaid by Wall Street in the future.

Federal Reserve Governance Reform:
Today, the powerful Federal Reserve is functionally controlled by its regulated banks, with banks choosing 2 out of every 3 regional Fed Bank directors.

  • We won: The bill partially ends this conflict of interest by eliminating the ability of the bank representative directors to vote for the regional bank Presidents.
  • We lost: The conference eliminated the most powerful provisions: barring member banks from voting for directors or bank officers serving as directors (“the Jamie Dimon rule”) and making the powerful NY Fed Bank President presidentially-elected.

Federal Reserve Transparency / Audit:

  • We won:
    • The bill includes a one-time audit of all Federal Reserve 13(3) emergency lending during the ‘07-’08 financial crisis, and ongoing GAO audit authority for future 13(3) and Fed discount window lending, as well as its open market transactions.
    • The bill also ends the Fed’s open-ended bailout authority by limiting 13(3) lending to system-wide support for healthy companies, not propping up individual troubled firms, and requiring that taxpayers be paid back.
  • We lost: However, the conference eliminated the House’s more comprehensive audit of the Federal Reserve.

Derivatives Clearing
Clearing requirements will ensure that trades are processed through third-party clearinghouses that guarantee payment in case of default and require parties to have cash to back their bets.

  • We won: Despite tremendous pressure from special interest groups claiming they should be exempt from clearing requirements, it is estimated that the conference report will require around 90% of standard derivatives to clear. This means that once the bill is passed large banks, insurance companies, hedge funds and other financial institutions will be required to submit standardized swaps to clearinghouses and post margin to back their bets. The only exemptions from the clearing requirements are for commercial companies like airlines and home heating oil distributors and other small players in the derivatives market who are legitimately hedging risk.