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Hirono votes for Wall Street Reform and Consumer Protection Act


Congresswoman Mazie K. Hirono has voted in favor of the Wall Street Reform and Consumer Protection Act, H.R. 4173, in order to institute common sense reforms to our financial system and provide consumer protections for American families and businesses.

The bill passed the House by a vote of 223 yeas to 202 nays.

“Years of deregulation and exorbitant risk-taking in the financial markets contributed to the financial turmoil that we’re in today,” Hirono said. “This bill finally begins to put our house back in order by establishing common-sense rules so that taxpayers are never again on the hook for bailing out financial firms and banks, whose risky and irresponsible behavior put our economy on the brink of disaster.

“By creating a new Consumer Financial Protection Agency, this bill will also help regulate subprime loans and other predatory lending practices that brought on the housing crisis and undermined our financial system,” she said.

Systemic Risk Prevention

The Wall Street Reform and Consumer Protection Act creates a council of federal regulators to monitor the financial system for companies that have become so large or interconnected that their failure could threaten the economy. Such firms are considered systemic risks.

Along with the Federal Reserve, the council could impose new restrictions on any company it designates as posing a systemic risk. Large financial institutions will no longer be bailed out because they are “too big to fail.”

These institutions will be allowed to fail, but in a way that protects the economy.

Dissolution of “too big to fail” financial firms (large banks and other financial institutions with at least $50 billion in assets) will be paid for first by shareholders and creditors, by any remaining assets of the failed company, and then through an industry-funded (not taxpayer-funded) effort. These institutions will be required to pay assessments based on their potential risk to the entire financial system if they were to fail.

The legislation strengthens supervision of these large and risky financial institutions with stronger capital standards and rules against excessive and overly risky leverage.

Consumer Financial Protection Agency

The legislation establishes a new Consumer Financial Protection Agency (CFPA) to make sure that bank loans, mortgages, and credit cards are fair, affordable, understandable, and transparent. The sole mission of this agency will be to oversee potentially harmful financial products sold to consumers. This critical enforcement is necessary to do the following:

* Ensure that consumers get information that is clear and concise from banks, mortgage servicers, and credit card companies;

* Prevent the financial industry from offering subprime and predatory mortgage loans to people who can’t afford repayment;

* Put in place common sense regulations to stop abuses by the financial industry, such as predatory lending, payday loans, check cashers, and exorbitant overdraft fees.

The CFPA will consolidate and streamline enforcement of roughly 20 laws currently overseen by seven different agencies, reducing regulatory burden and expense and making consumer protection its sole priority.

New Rules on Riskiest Financial Practices

The Wall Street Reform and Consumer Protection Act:

* Strengthens enforcement by the Securities and Exchange Commission (SEC) to better protect investors and prevent future Bernie Madoff Ponzi schemes;

* Establishes rules to curtail excess speculation in derivatives and growing use of unregulated credit default swaps that devastated AIG and Bear Stearns;

* Provides more transparency and tougher regulation of hedge funds, private equity firms, and credit rating agencies, whose seal of approval gave way to excessively risky practices that led to a collapse in our financial system;

* Requires investment advisors to act for the sole benefit of their client under the law, exercising the highest standard of care.

Addressing Excessive Executive Compensation

H.R. 4173 provides shareholders of public companies with an annual, non-binding vote on executive compensation and golden parachutes for the top five executives.

The bill requires independent directors to be on the compensation committees of public companies and authorizes the SEC to restrict or prohibit “inappropriate or imprudently risky compensation practices” at large financial firms with at least $1 billion in assets.

Protection of Community and Small Banks and Merchants

Banks and thrifts under $10 billion in assets and credit unions under $1.5 billion in assets will continue to have their consumer protection examinations conducted by their existing regulators. The CFPA will only play a backup role if the primary regulators fail in their oversight, and these institutions will not see their assessments for consumer protection exams change under this bill.

In addition, merchants, retailers, and other non-financial businesses will be excluded from the regulation and oversight of the CFPA when they extend credit directly to consumers for the purchase of goods or services (as long as they do not resell the credit). Doctors and firms that bill their customers after a service is provided will also be excluded.

Increase of Transparency at the Federal Reserve

This legislation increases transparency of the Federal Reserve’s lending programs by subjecting them to scrutiny by the non-partisan Government Accountability Office. The Federal Reserve’s use of authority to extend short-term borrowing and secured loans to individuals, partnerships, or corporations in “unusual and exigent circumstances” will be subject to significant new restrictions.

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