Research Briefing

A Bill Supported By Big Banks And Opposed By Main Street Businesses Is Not Real Reform

Last Night, Senate Passes Obama-Dodd Financial Regulatory Bill With A Vote Of 59-39.  (HR 4173, Roll Call Vote #162: Passed 59-39, R 4-37, D 53-2, I 2-0)

WHO SUPPORTS THE BILL? WALL STREET AND DEMOCRATS

Goldman Sachs CEO, Lloyd Blankfein, Says That He Supports The Dodd Bill And Agrees The “Biggest Beneficiaries Of Reform Will Be Wall Street Itself.” “I'm generally supportive. . . . [O]n the whole, financial reform is, absolutely is essential and I will say that last week, in New York, I listened to a speech by Barack Obama at Wall Street, and one of the points he made resonated with me because I’d said it myself. He said that the biggest beneficiaries of reform will be Wall Street itself.” (Lloyd Blankfein, Homeland Security & Government Affairs, Permanent Subcommittee On Investigations, U.S. Senate, Hearing, 4/27/10)

Citigroup CEO, Vickram Pandit, Endorsed Obama-Dodd Bill. “I was gratified to hear you speak about these principles as the foundation of regulatory reform and you can count on me and the entire Citi organization to support them.” (Vickram S. Pandit, Letter To President Barack Obama, 4/23/10)

J.P. Morgan CEO Jamie Dimon Agrees With 80% Of The Bill. “‘It's obvious we need to reform our financial system. JPMorgan has supported most of the things that came out,’ Jamie Dimon said as he accepted an award Thursday from the Executives' Club of Chicago. ‘We agree with 80 percent. We might be right on the other 20 percent.’” (Greg Burns, “Jamie Dimon ‘80 Percent’ In Favor Of Reform Plan,” Chicago Tribune, 4/22/10)

Senate Democrats Overwhelmingly Supported The Obama-Dodd Financial Regulatory Bill Last Night.  (HR 4173, Roll Call Vote #162: Passed 59-39, R 4-37, D 53-2, I 2-0)

WHO OPPOSES IT? MAIN STREET AND REPUBLICANS

Doug Tippens, CEO Of A Community Bank Opposes The Bill Because It Would Hurt Community Banks That Had Nothing To Do With The Crisis. “We all watched in amazement as the cataclysmic meltdown of some of the largest financial firms in the United States nearly toppled our economy in September 2008. But how many traditional community banks in Oklahoma caused the problems? None. So why would Oklahoma bankers oppose the financial reform bill pending in the Senate? Simple: As presently drafted, the bill doesn’t end "too big to fail” and would increase the costs and reporting obligations of traditional community banks and their customers.” (Doug Tippens, Op-Ed, “Reform Will Hurt Banks,” The Oklahoman, 4/28/10)

Many Companies Oppose The Bill Because So-Called Consumer Protections Would Hit Them Despite Having Had Nothing To Do With The Economic Crisis. “The bill also would cast a broad net, opponents say, over companies that had little to do with the housing crisis and subsequent recession — a group known as nonbank financial companies, which includes such longtime Democratic targets as payday lenders, which make short-term loans at high interest rates.” (Edward Wyatt and Sewell Chan, “Debate Over Reach Of A Consumer Agency,” The New York Times, 5/1/10)

• Far From Wall Street, Job Creators Like Harley-Davidson And EBay Oppose The Bill And Its New Restrictions. “Harley-Davidson is worried that its dealer-financed loans to bikers will fall victim to new federal financing regulations. And eBay is concerned about possible restrictions on PayPal, a subsidiary, in moving money in the Internet marketplace. . . The lobbying push by these other industries shows just how broadly the legislation could affect businesses.” (Eric Lichtblau and Ron Nixon, "Off Wall St., Worries About Financial Bill," The New York Times, 4/26/10)

Dentists, Physicians, And Other Companies That Accept Installment Payments Oppose The Bill Because They Could Face Crippling Regulations. “Dentists could fall under the Senate financial bill because they often allow patients to pay in installments, Graham said. According to a 2009 ADA survey, roughly half of dentists offer this type of billing for three or four months. Rep. Nydia Velázquez (D-N.Y.), chairwoman of the House Small Business Committee, told Dodd it was “more than likely” that small healthcare practices, including dentists and physicians, would fall under the scope of the new regulator. She noted a recent Federal Trade Commission (FTC) decision that dental and law practices were considered creditors as an example of regulators crafting broad interpretations.” (Silla Brush, “Dentists Feel Pain From Wall Street Reform Bill,” The Hill, 5/3/10)

Financial Reform Could Limit Credit Available To Consumers, Make Lending More Expensive And Cause Some Companies To Flee States Altogether. “Although tougher standards on banks could benefit many consumers, they could also lead to tighter credit conditions in certain states or for certain borrowers. ‘The cost to fully understand and comply with rules changes is hundreds of millions of dollars, which we will all subsidize to a great extent,’ says John Ulzheimer, president for educational services at Credit.com. Issuers and banks could wind up fleeing certain states to avoid compliance, he adds.” (Diana Ransom, “How Financial Reform Could Affect Your Credit,” Wall Street Journal “SmartMoney” Blog, 3/23/10)

Local Auto Dealers Oppose The Bill Because It Goes After “The Wrong People” And Would “Drive Up The Cost Of Auto Financing.” “The dealers say the measure would drive up the cost of auto financing because it would require hiring more people to follow federal regulations. They say it also could limit the types of financial products they offer. ‘It's dangerous and it's aiming at the wrong people,’ said Ed Tonkin, chairman of the National Automobile Dealers Association. ‘It's using a sledgehammer to go after a gnat, and we're not that gnat.’” (Damian Paletta and Victoria McGranae, “Car Dealers Seek Exemption,” The Wall Street Journal, 4/28/10)

Senate Republicans Overwhelmingly Opposed The Obama-Dodd Financial Regulatory Bill Last Night.  (HR 4173, Roll Call Vote #162: Passed 59-39, R 4-37, D 53-2, I 2-0)

NO WONDER DEMOCRATS HAVE A CREDIBILITY GAP ON REFORM

Richmond Federal Reserve President Says Obama's Bill Could Create “More Instability In Financial Markets Rather Than Less.” “In fact, it seems to me that a major danger is that there's going to be more instability in financial markets rather than less.” (CNBC's "The Call," 4/6/10)

MIT Finance Professor Says Obama-Dodd Bill May Be “Ineffective” At Best, “Counterproductive”At Worst Because “So Much About The Crisis Remains Unclear.” “thers simply argue that it is premature to pass sweeping legislation while so much about the crisis remains unclear and so many inquiries are in progress. 'Until we understand what the causes were, we may be implementing ineffective and even counterproductive reforms,' said Andrew W. Lo, a finance professor at the Massachusetts Institute of Technology.” (Binyamin Appelbaum and Sewell Chan, "Senate Financial Bill Misguided, Some Academics Say," The New York Times, 5/3/10)

• “I Understand The Need For Something To Be Done. But What I Expect From Political Leaders Is For Them To Demonstrate Leadership In Telling The Public That We Need To Proceed About This In A Much More Deliberate And Rational And Thoughtful Way.” (Binyamin Appelbaum and Sewell Chan, "Senate Financial Bill Misguided, Some Academics Say," The New York Times, 5/3/10)

Letter From 36 Economists, Experts Say Obama's Bill Would Not Have Prevented Financial Crisis. “Nineteen months after the most devastating financial crisis since the great depression, our financial system remains at risk. Neither the bill passed earlier this year by the house, nor the one currently under consideration in the senate would have prevented the crisis.”(Marcellus Andrews, et al., Letter To Senators Reid and McConnell, 4/14/10)

Yale Finance Professor Calls Obama-Dodd Bill “Tragic” Because "Financial System Would Remain Vulnerable To Panics.” “Gary B. Gorton, a finance professor at Yale, said the financial system would remain vulnerable to panics because the legislation would not improve the reliability of the markets where lenders get money ... 'It is unfortunate if we end up repeating history ... It's basically tragic that we can't understand the importance of this issue.’” (Binyamin Appelbaum and Sewell Chan, "Senate Financial Bill Misguided, Some Academics Say," The New York Times, 5/3/10)

NYU Finance Professor Says “It's Outrageous” That Reform Of Fannie Mae And Freddie Mac Not Included In Obama-Dodd Bill. "Lawrence J. White, a finance professor at New York University, said it made no sense to overhaul financial regulation without addressing the future of federal housing policy. He said he was trying to find the strongest possible words to describe the omission of Fannie Mae and Freddie Mac from the legislation. ‘It's outrageous,’ he finally said.” (Binyamin Appelbaum and Sewell Chan, "Senate Financial Bill Misguided, Some Academics Say," The New York Times, 5/3/10)

• Professor White Joins Republicans Who Have "Repeatedly Criticized The Administration For Advancing Legislation That Does Not Address" Fannie And Freddie. "A second group of critics say the government helped to seed the crisis through its efforts to increase home ownership, including the role of Fannie Mae and Freddie Mac in buying mortgage loans to make more money available for lending ... Republicans have repeatedly criticized the administration for advancing legislation that does not address the companies' future." (Binyamin Appelbaum and Sewell Chan, "Senate Financial Bill Misguided, Some Academics Say," The New Yo rk Times, 5/3/10)