Financial Reform

What Worked, What Didn't,

By Jill Mazzetta

This article is from the March/April 2006 issue of Dollars & Sense: The Magazine of Economic Justice available at http://www.dollarsandsense.org


issue 264 cover

This article is from the March/April 2006 issue of Dollars & Sense magazine.

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Title of Amendment> Description: Status
Transaction Taxs Would impose a small tax on most trades of stocks and securities, discouraging brokers from trading back and forth to inflate their profits and/or manipulate the market. Never seriously considered, not a part of the bill.
Volcker Rule (Merkley Levin Amendment) Prohibits banks from engaging in proprietary trading, the act of trading to bolster their own wealth instead of that of their clients. Does not prevent commercial banks from engaging in investment activities such as trading in securities. Proposed; no vote yet
Too Big to Fail (S.AMDT 3733) Limits the size and liabilities of big banks to prevent them from becoming “too big to fail” again. Rejected
Audit of Federal Reserve (S.AMDT 3738) Mandates a one-time audit of the Federal Reserve’s response to the financial crisis, including public disclosure of how over $2 trillion in aid was distributed. A more aggressive version of this amendment, requiring the audit to be handled by an independent agency, was rejected. Accepted
Whistleblower Protections (S.AMDT 3840) Provides whistleblower protections for employees of credit-rating agencies, such as Moody's and Standard & Poor's. Similar protections to those of the 2002 Sarbanes-Oxley Act, which enhanced accountability and auditing standards for public companies. Accepted
Derivative Regulation Loosening (S.AMDT.3816) Allows banks to keep their derivatives businesses as they currently are. Derivatives, complex financial agreements whose value is derived from some other asset, typically the underlying stock, were at the core of the financial collapse. Relaxes several other regulation measures in the original bill. Rejected
Predatory Lending Prevention (S.AMDT.3962) Prevents mortgage dealers from receiving undisclosed financial incentives for selling risky loans. Requires underwriters to verify that clients are capable of making future payments before approving loans. Accepted
Debit Transaction Control (S.AMDT.3989) Creates a limit on the fees retail businesses incur when processing debit card transactions. Would save billions of dollars for all businesses whose customers increasingly pay with debit cards, from family restaurants to Wal-Mart. Does not specifically address credit card transactions. Accepted
State Banking Regulations (S.AMDT.4071) Relaxes restrictions on federal authority to prevent states from creating their own, more aggressive regulations against big banks. Accepted
Derivatives Provision (compromise: Dodd Amendment, S.AMDT.4100) Requires banks to spin off their trade in derivatives or else lose government insurance of their clients’ deposits. This provision would delay the restrictions for two years in order to be reviewed by a special regulation council. However, this council would likely “kill” the provision. Proposed, no vote yet
To Prohibit Naked Credit Default Swaps (S.AMDT. 4114) Would outlaw so-called naked credit default swaps, insurance-like contracts that will cover losses on certain securities in the event of a default. Never seriously considered

Peter Wagner is executive director of the Prison Policy Initiative. Susan Edwards is a government documents librarian at Amherst College. Together they are writing a book on how to use Census data for research and advocacy.