House approves major financial regulation bill

The House on Friday passed the most sweeping regulatory overhaul of the nation’s financial sector since the New Deal, a measure that calls for greater consumer protections and tighter government control of the industry.

The measure still faces hurdles in the Senate, which is expected to take it up in early 2010. But House Democratic leaders where able to fend off fierce opposition from Republicans and major financial interest groups, as well as a threatened mutiny within their ranks, to advance one of President Obama’s top domestic priorities.

The bill passed by a vote of 223-202 with no Republicans in support. Only 27 Democrats voted against the measure.

House Speaker Nancy Pelosi called the vote “historic.”

“This legislation finally will protect Main Street from the worst of Wall Street,” the California Democrat said.

House Majority Leader Steny H. Hoyer said the measure would “put the referees back on the field” of financial regulation.

“Last year, a Republican policy of deliberate neglect brought our economy to the brink,” the Maryland Democrat said. “If a bill like this had been in place a little more than half a decade ago, how many more families would still be in their homes?”

Republicans decried the bill as an egregious example of government overreach, one that would stifle markets and make it more difficult for consumers and small businesses to get loans.

“All of us recognized there are shortcomings in our financial regulatory system, but I do believe the overreach by my Democrat colleagues on this bill is really beyond imagination,” said House Minority Leader John A. Boehner, Ohio Republican. “It’s exactly what the American people don’t want.”

The legislation, which had been in the works for months, calls for an independent Consumer Financial Protection Agency designed to protect the public against abuses such as unscrupulous mortgage deals and excessive credit card rates. The administration has pushed hard for the consumer agency, which would strip consumer regulatory powers from the Federal Reserve.

The measure calls for a “Financial Services Oversight Council” to monitor the health of the overall financial system. The agency would identify and regulate financial firms that are so large and interconnected that their collapse would put the entire financial system at risk, a scenario that prompted Congress last fall to approve the publicly unpopular $700 billion Troubled Asset Relief Program, or TARP.

The bill also would give the government the authority to step in and dismantle failing nonbank financial firms deemed so large that their demise could bring down the economy. Financial sector regulators have similar authority over traditional banks, but were powerless last year when Lehman Brothers investment bank and insurance giant American International Group Inc. faced collapse.

Republicans say the provision to “wind down” failing firms amounts to a permanent bailout authority for the government.

“This was a missed opportunity to end the bailouts, terminate TARP and stop picking winners and losers,” said Rep. Spencer Bachus of Alabama, the top Republican on the Financial Services Committee. “As in the case of health care and energy policy, this bill was about empowering the government and not the individual.”

But House Financial Services Chairman Barney Frank called the Republicans’ argument a fantasy, saying that the cost for euthanizing failing companies would be paid for through an assessment on large financial companies, not the taxpayers.

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