H.R.4173: Wall Street Reform and Consumer Protection Act of 2009

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Article summary (how summaries work)
This is comprehensive legislation to overhaul regulations in the financial sector. It would establish a new Consumer Financial Protection Agency to regulate products like home mortgages, car loans and credit cards, give the Treasury Department new authority to place non-bank financial firms, like insurance companies into receivership, regulate the over-the-counter derivatives market, and more. The differing Senate and House versions are currently being reconciled by congressional negotiators.


Bill provisions

The bill as written by the conference committee, and passed by the House June 30, 2010, contains the following provisions:

Consumer Protection

  • Creates the Consumer Financial Protection Bureau, which will
    • be able to write consumer protection rules that govern all financial institutions offering consumer financial services or products
    • be able to examine and enforce regulations for banks or credit unions with assets of over $10 billion
  • Creates a new Office of Financial Literacy, and a national consumer complaint hotline.[1]

Investor Protections and the SEC

  • Creates a program within the SEC to encourage reporting of securities violations
  • Requires a study of the SEC by outside consultants
  • Creates the Investment Advisory Committee, to advise the SEC, and the Office of Investor Advocate in the SEC, to identify problems investors have with the SEC
  • Increases SEC funding[1]

Financial Stability and Regulation

  • Creates the Financial Stability Oversight Council, which will:
    • be able to require (with a 2/3 vote) that a nonbank financial company be regulated by the Federal Reserve
    • be able to require (with a 2/3 vote) that the Federal Reserve break up a large company
  • States that taxpayers will not have to pay to save a failing financial company or fund its liquidation
  • Requires hedge funds and private equity advisors to register with the SEC
  • Raises the assets threshold for federal regulation of investment advisers from $30 million to $100 million, shifting many advisers to state regulation
  • Allows the SEC and CFTC to regulate over-the-counter derivatives
  • Creates a liquidation mechanism for the FDIC to handle failing systemically significant financial companies[1]
  • Includes a version of the Volcker Rule. Speculative trading on the bank's account will be prohibited, but banks will be able to invest up to 3% of common capital in private equity funds or hedge funds.[2]

Mortgage Reform and Handling the Mortgage Crisis

  • Establishes a federal standard for home loans, and requires that institutions ensure that borrowers can repay their loans
  • Prohibits financial incentives for subprime loans that encourage lenders to steer borrowers towards more expensive loans
  • Requires lenders to disclose the maximum amount a consumer might may on a variable rate mortgage
  • Establishes the Office of Housing Counseling (within HUD)
  • Provides $1 billion to states and localities to rehabilitate, redevelop, and reuse abandoned and foreclosed properties
  • Provides $1 billion to help cover mortgage payments for unemployed homeowners with reasonable prospects for reemployment
  • Authorizes a HUD program to help provide forecloseure legal assistance to low- and moderate-income homeowners and tenants[1]

Credit Rating Agencies

  • Creates an Office of Credit Ratings (within the SEC), with the authority to fine agencies
  • Allows the SEC to deregister an agency if it provides bad ratings
  • Eliminates some rules that require NRSRO ratings
  • Will prevent security issuers from picking an agency that they believe will give them a better rating[1]

Federal Reserve

  • Prohibits the Federal Reserve from using its 13(3) emergency lending power to make such loans to an individual entity or an insolvent firm
  • Requries that the GAO conduct an audit of 13(3) lending during the financial crisis (a report on the matter will be published on the Federal Reserve's website by December 1, 2010)
  • Allows the GAO to audit the Federal Reserve's 13(3) and discount window lending, and open market transactions, in the future
  • Requires the Federal Reserve to disclose certain information about 13(3) and discount window lending, and open market transactions[1]

Other Provisions

  • Requires that public companies take back executive compensation if it was based on inaccurate financial statements
  • Permanently raises deposit insurance for banks, credit unions, and thrifts to $250,000
  • Creates the Federal Insurance Office, which will gather information about the insurance industry
  • Prohibits unreasonable interchange fees (fees charged to merchants by credit card companies for transactions)
  • Requires that anyone who files with the SEC and uses minerals from the Democratic Republic of Congo in manufacturing to "disclose measures taken to exercise due diligence on the source and chain of custody of the materials and the products manufactured"[1]

Bill history

June 30, 2010 House Vote on Conference Report

The House passed the conference report by a vote of 237-192.

Conference Committee

The committee finalized much of the bill the night of June 24:

  • They added a version of the Volcker Rule, which prohibited banks from investing their own money for their own profit (though there was an exception, allowing banks to invest up to 3% of their Tier-1 capital in hedge funds, to try to secure Scott Brown's support).
  • They included a section that was supposed to stop banks from getting taxpayer subsidies for their risky derivatives trades. However, a loophole is expected to allow around 90% of derivatives trades to get federal backing.
  • They would require that the majority of derivatives be approved by clearinghouses and traded on exchanges with margin requirements and pricing transparency (a requirement from the Senate bill that made it in without any of the loopholes from the House bill).
  • They added a $19 billion tax on big banks, intended to make the bill deficit-neutral.[3] However, on June 29, the committee dropped it in an attempt to win back Scott Brown's vote. Instead, some of the bill's cost would be covered by ending TARP earlier and raising FDIC fees.[4]

May 24, 2010 Vote on Brownback Motion

This was a motion in the Senate to instruct conferees (a non-binding suggestion to conference committee members) from Sam Brownback. The House version of the bill exempted car dealers that facilitate loans from oversight by the proposed Consumer Financial Protection Bureau. The Senate version lacked such an exemption, and the motion recommended that the Senate conferees accept the House language on this issue.

The motion was approved 60-30.[5]

May 20, 2010 Vote

The Senate passed their financial reform bill, the Restoring American Financial Stability Act, by a vote of 59-39. Four Republicans joined most Democrats in supporting it, and two Democrats broke rank from the left to vote against it.

They added a substitute amendment to the House’s bill, so S.3217: Restoring American Financial Stability Act of 2010 became H.R.4173, resulting in two significantly different versions of the same bill: one passed by the House and one passed by the Senate.[6]

The Senate bill was somewhat different on a number of points. It would:[7]

  • Place the consumer protection agency within the Federal Reserve, rather than making it independent
  • Exclude small business that aren't engaged in financial activities from oversight
  • Allow only a one-time GAO audit of the Fed
  • Have the Fed continue to oversee small, regional banks
  • Allow the Fed to split apart large companies that threaten the financial system
  • Prohibit banks from trading derivatives
  • Allow large, failing firms to be liquidated
  • Includes a version of the Volcker Rule (preventing banks from making investments with their money for their own profit, although regulators would study that sort of trading before imposing restrictions)
  • Have executives return compensation based on inaccurate financial statements

December 11, 2009 Vote

The House passed their financial reform bill by a vote of 223 to 202. 26 Democrats joined with all of the Republicans (excepting the two that abstained) to vote against it.[8]

Articles and resources

See also


  1. 1.0 1.1 1.2 1.3 1.4 1.5 1.6 House Financial Services Committee, Dodd-Frank Wall Street Reform and Consumer Protection Act Summary
  2. David Dayen, FinReg Passes Conference: Details on Volcker Rule, Section 716 Provisions
  3. Donny Shaw, "While You Were Sleeping ...Congress Regulates the $600 Trillion Derivatives Market"
  4. Hilary Worden, "Dems Drop Bank Tax for Republican Votes on Financial Reform "
  5. Donny Shaw, Senate Votes to Exempt Car Dealers From Consumer Protections
  6. Donny Shaw, "What's Next for Reforming Wall Street " May 21, 2010.
  7. PBS, "Reconciling House and Senate Financial Reform"
  8. OpenCongress Actions & Votes for H.R.4173

External resources

External articles