After a classic David and Goliath showdown between Wall Street might and a small band of reformers, a 2,000 page Wall Street reform bill passed the U.S. Senate Thursday afternoon 60-39. The bill is now final and is headed to the President Obama's desk for signature.
"We were outmatched 300-1, but the bill became stronger as it worked its way through the process," said Heather Booth, director of the national coalition Americans for Financial Reform (AFR). This shows that "with organized people and committed leadership, things can move in the right direction," said Booth.
AFR's 250 consumer, labor, business, housing and grassroots groups, along with dozens of academics and think tanks, came together in an unprecedented effort to pool their expertise on complex financial matters to provide a counterweight to the big money lobbying onslaught and technical expertise of Wall Street.
"The banks spent more each day than we spent in a year, pitting a veritable army of well-connected lobbyists -- over 2,600 of them -- against a few dozen public interest advocates who fought for reform," said David Arkush of the consumer group Public Citizen. But the reformers won because "we were joined by tens of millions of Americans, who channeled their fury at what Wall Street did to them -- to their jobs, to their homes, and to their families -- into an unprecedented force for change in the financial sector."
The bill creates a Consumer Financial Protection Bureau which will ensure that "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," says Booth. The bureau was the brain-child of Harvard Law Professor Elizabeth Warren, who many reformers hope will be appointed its first chair. The American Bankers Association and the U.S. Chamber of Commerce spent millions on paid media and lobbying to kill the agency, but were unsuccessful.
For the first time, the vast majority of derivatives will be cleared and traded on an open exchange where margin requirements and position limits would apply. "The derivatives chapter is far stronger than we dared hope for in the beginning, given how central this naked, unregulated betting has been to Wall Street profits. It's where the money is, it's where the firestorm began, and against all odds, we won real reform," said Heather McGhee of DEMOS, the public policy and research institute.
The bill also contains strong, new mortgage rules that say lenders must assess a borrower's ability to repay a loan; that ban kickbacks which encourage lenders and brokers to steer borrowers into more expensive, riskier loans; and that limit prepayment penalties. "Implementing these policies nationwide is a giant step towards ending practices that have cost millions of families hundreds of billions of dollars in lost wealth during the foreclosure crisis," says Michael Calhoun of the Center for Responsible Lending.
Small business groups also played a role in the passage of the bill. "Business owners who know the difference between investment and gambling worked hard for passage of financial reform," said Business for Shared Prosperity Director Holly Sklar. "Financial reform is an important step in moving us from a destructive casino economy to a productive sustainable economy."
But the magic formula for this rare win over an entrenched special interest whose lobbying effort will top $600 million was public outrage and citizen activism. Ed Mierzwinski, with the consumer group U.S. PIRG, noted that "unlike the health care bill which got weaker as messaging confused the public, this bill got stronger as we went along because people whose 401k's read like Stephen King novels kept calling Congress."
Over the course of the year, hundreds of protests were held across the country in dozens of towns -- large and small -- in front of bailed out banks, mortgage firms and small payday loan operations. Major rallies organized by grassroots organizations like National People's Action and PICO as well as AFL-CIO, SEIU occurred in Chicago, San Francisco, New York and Washington, D.C.
But no one is resting on their laurels. A statement from National People's Action to its grassroots members said, "this legislation does many things to prevent a future crisis, but it does not make banks responsible for cleaning up the mess they created, and it doesn't break up the big banks or outlaw payday lending. Congratulations on winning Round One and get ready: it's time to win Round Two!"
Arkush agrees. "This victory is a testament to the power of ordinary people in America. It's a power we'll need, because there is much more work to be done."