Obama signs financial overhaul into law
Thursday, July 22, 2010
As much as it felt like an ending, President Obama launched a new era in the relationship between Washington and the financial world when he placed his signature Wednesday on a massive bill to rewrite the nation's financial rules.
Inside a building named after a Republican president who championed deregulation and praised the "magic of the marketplace," the Democratic president signed into law the most ambitious overhaul of financial regulation in generations, saying he was acting to protect ordinary consumers and to "rein in the abuse and excess" on Wall Street that pushed the U.S. economy to the brink of collapse.
The landmark legislation, which came after more than a year of legislative wrangling and intense lobbying, grants broad new powers to federal watchdogs -- and places great faith in them to prevent another crisis.
"For years, our financial sector was governed by antiquated and poorly enforced rules that allowed some to game the system and take risks that endangered the entire economy," Obama said before 400 supporters at the Ronald Reagan Building and International Trade Center. "Soon after taking office, I proposed a set of reforms to empower consumers and investors, to bring the shadowy deals that caused this crisis into the light of day, and to put a stop to taxpayer bailouts once and for all. Today, those reforms will become the law of the land."
But the president acknowledged that the far-reaching regulations in the bill will prove only as good as the people who implement them.
"For these new rules to be effective, regulators will have to be vigilant," he said. "We also may need to make adjustments along the way as our financial system adapts to these changes. And no law can force anybody to be responsible; it is still incumbent on those on Wall Street to heed the lessons of this crisis in how they conduct business."
The moment marked a second major legislative victory for Obama this year, coming after the health-care bill that passed in March.
Obama paid tribute in his remarks to the two lawmakers who shepherded the bill through Congress and for whom the Dodd-Frank Wall Street Reform and Consumer Protection Act is named: Sen. Christopher J. Dodd (D-Conn.) and Rep. Barney Frank (D-Mass.). A supportive crowd -- composed of administration officials, consumer advocates, top regulators, state attorneys general, congressional aides and lawmakers who backed the legislation -- gave the pair a standing ovation, one of six during the brief event.
The law closely resembles the blueprint unveiled by the administration in June 2009. It establishes an independent consumer bureau within the Federal Reserve to protect borrowers against abuses in mortgage, credit-card and some other types of lending. It grants the government new authority to seize and wind down large, troubled financial firms -- such as the failed investment bank Lehman Brothers -- and sets up a council of federal regulators to monitor threats to the financial system. It mandates oversight of the vast market for derivatives -- complex financial instruments that helped fuel the crisis -- and gives shareholders more say on how corporate executives are paid.
With few exceptions, the legislation does not attempt to alter the fundamental shape of Wall Street, disappointing some liberals and consumer groups. It stops short of breaking up the nation's megabanks, it leaves out a ban on trading certain derivatives, and it doesn't set firm limits on executive pay. Nor does it significantly streamline the alphabet soup of financial regulators in Washington.
Away from the celebratory scene downtown, Republicans on Capitol Hill and business and financial industry executives expressed disappointment and disdain, arguing that the bill will spawn a more intrusive and expansive federal bureaucracy. They said that the law fails to eliminate the possibility of future taxpayers bailouts, that it could undermine the competitiveness of U.S. companies, stifle financial innovation, crimp credit and exacerbate unemployment.
"When you cut through all the talking points about what financial regulation will do, the practical, real-world effect of this bill in the near term will be job loss," Minority Leader Mitch McConnell (R-Ky.) said on the Senate floor. "The White House will declare this bill a victory. But for millions of Americans struggling to find work, for millions of small-business owners bracing themselves for all the new regulations they'll have to deal with, for ordinary Americans who just wanted to see an end to the bailouts, this bill is no victory."
Thomas J. Donohue, president of the U.S. Chamber of Commerce, which staunchly opposed the bill, called it "nothing more than a financial regulatory boondoggle" in a statement. "It won't strengthen our capital markets, it won't jumpstart the economy, and it won't help create any new jobs except in government," he said.
Such criticism did little to hinder the festive atmosphere Wednesday inside the Reagan Building. Aides and administration allies shared hugs and handshakes. Lawmakers donned their favorite ties to pose beside Obama. Harvard law professor Elizabeth Warren, a key proponent of the new consumer watchdog, pulled a camera from her purse and got a picture of herself with former Fed chairman Paul Volcker, who had pushed to limit risky trading at banks. They both sat front and center, smiling.
"It's a wonderful thing," Assistant Treasury Secretary Michael Barr, who brought his wife along for the occasion, said to one well-wisher.
After his speech, Obama sat at a wooden desk and signed the bill with 11 different pens. "It's done," he said, rising to leave.
But really, it's only beginning.