Financial experts react to financial overhaul

July 21, 2010 7:42:11 PM PDT
The administration calls a measure President Barack Obama signed into law Wednesday the largest overhaul of financial regulations since the Great Depression.

The president and Democratic lawmakers are putting the best face on this that they can, but the critics are not limited to just the political opposition.

As he signed the law, the president hoped for a new era of financial responsibility and promised protection.

"These reforms represent the strongest consumer financial protections in history," Obama said.

The legislation gives the government new powers to break up companies considered too big to fail, requires greater disclosure of financial markets that escaped the oversight of regulators and creates the Consumer Financial Protection Agency.

But economist, White House advisor and former labor secretary Robert Reich says too much is left out.

"The capital requirements are not high enough, there is not enough separation between commercial and investment banking, the salary structures are creating incentives to gamble with other people's money," Reich said.

Reich says Wall Street used its political clout to gut the bill.

"And given the scale of that financial blowup and what it did to the rest of the country, shame on Wall Street and shame on congress for not doing more," Reich said.

On Monday ABC7 asked Sen. Barbara Boxer, D-Calif., about Congress' failure to include tougher regulation.

"We passed this Wall Street reform; never again will taxpayers have to bail out any private bank or any private company on Wall Street; this is really good, we've created a consumer protection agency, never again will consumer who apply for mortgages or credit cards be blindsided in the fine print, this is really positive," Boxer said.

Stephen Pizzo, author of Inside Job: The Looting of America's Savings and Loan, says the bill does have some consumer protections.

"But the guts of the bill fails to deal with the systemic problem that got us into this mess in the first place," Pizzo said.

In 1991 Pizzo testified to Congress about the dangers of repealing the Glass-Steigal Act, which had separated commercial banks from riskier Wall Street investment banks.

"Well they went ahead and did it anyway and I told them at the time, 'You do this and you'll have a mess on your hands that will make the Savings and Loan mess look like small potatoes,'" Pizzo said.

Pizzo also warns the battle is far from over. He expects a small army of lobbyists on Capitol Hill as regulators hash out many of the details left unresolved in the legislation.


Load Comments