Last week President Barack Obama signed into law the most drastic legislation on bank and Wall Street reform in 70 years.
The financial reform bill provides tougher regulations on banks and financial institutions and additional protections for consumers, many of which directly benefit African Americans.
The Dodd-Frank Wall Street Reform and Consumer Protection Act was a response to the severe downturn of the U.S. economy during which “too big to fail” institutions like AIG and Lehman Brothers nearly uprooted America’s financial system two years ago.
Under the new legislation, the federal government now has the power to break up large failing financial companies and banks.
The legislation also establishes an Office of Minority and Women Inclusion to ensure diversity and introduces a new oversight agency that will regulate the industry and establish consumer safeguards.
The financial reform bill cleared the senate with 60-39 vote two weeks after the House passed the legislation.
“It’s designed to make sure that everyone follows the same set of rules, so that firms compete on price and quality, not on tricks and traps,” Obama said.
“It demands accountability and responsibility from everybody. It provides certainty to everyone from bankers to farmers to business owners to consumers. And unless your business model depends on cutting corners or bilking your customers, you have nothing to fear from this reform.”
The bill sets up a new agency called the Consumer Financial Protection Bureau within the U.S. Federal Reserve that will serve as an independent watchdog. The agency will guard consumers in their transactions by ensuring that they get clear information when it comes to mortgages and credit cards. The bureau will also guard consumers from hidden fees and other deceptive practices. The agency will monitor businesses both large and small on Wall Street.
The bill also creates a council to determine when large complex businesses are at risk before they threaten the economy’s stability. The bill also sets provisions to protect investors from abusive policies and enforce regulations to prevent business practices that benefit special interests at the expense of consumers and small businesses.
Only three Republican Senators voted for the bill. The opposition claims the bill is overreaching and says it will drive jobs overseas instead of creating jobs in the U.S. Another complaint is that the bill does not address mortgage giants Fannie Mae and Freddie Mac, which helped catapult the housing market collapse. John Boehner, the House Republican leader, has called for the bill’s repeal.
National Urban League President Marc Morial praised Congress for passing the legislation.
“The bill will help protect America’s families from predatory lending practices and guard against the risky practices that landed the nation in its current financial crisis,” Morial said.
Communities of color have been disproportionately affected by the financial crisis, and stand to gain the most from provisions like the newly-created Consumer Financial Protection Bureau and the additional investments in the Neighborhood Stabilization Program, as well as the creation of the Office of Minority and Women Inclusion, Morial noted.
The passing of the financial reform bill is the latest among a list of goals that President Obama promised to accomplish. Since his presidency, Obama has been slowly pulling troops out of Iraq and shifting the focus to Afghanistan, passed a healthcare reform bill and now an overhaul of the financial system that enforces more regulation, all of which the president promised during his campaign.
Additional reporting by Andrew Fowler for The St. Louis American.