A member of Floridas congressional delegation and a conservative Florida think tank say the largest federal financial regulation reform act proposed since the Great Depression doesnt fix the problems that created the current recession.
The U.S. Senate and House will start hammering out a final version of the overhaul soon after the week-long Memorial Day recess, but some say theres no saving the bill that could create new costs and red tape for businesses in the state.
Start with a fresh sheet of paper, said U.S. Rep. Bill Posey, R-Rockledge. Its 180 degrees headed in the wrong direction.
The ambitious overhaul backed by President Barack Obama cracks down on derivative investments, creates a process for the federal government to liquidate large financial companies that are too big too fail and creates a federal consumer protection regulator for oversight of checking accounts, mortgages and payday loans. It also cracks down on proprietary spending by banks and expands the Federal Reserves power to place restrictions on large companies.
Posey and every other Florida Republican in Congress voted against the bill when it was in the U.S. House and Senate. Florida lawmakers, reportedly locked in hearings, failed to return calls for comment Wednesday.
The bill furthers the unwise federal bailout of Wall Street, Posey said. It fails to hold accountable the regulators and financial institutions, particularly Fannie Mae and Freddie Mac, that created the financial crisis that arose when the housing bubble burst in 2007, he said.
The House version of the reform allows the federal government to use as much as $150 billion collected from some of the nations largest financial institutions to liquidate institutions too big too fail. The Senate version allocates money for the same purpose, but to be paid after the fact.
Nobodys been punished, Posey said. Nobodys been fired.
The financial regulation reform package was advanced through the Senate on May 20 and passed the U.S. House in December. Lawmakers plan to go into conferencing after Congress reconvenes in June to reconcile the versions from the two chambers and send a final bill to president Barack Obama by July 4.
The legislation has been a priority for Obama since his presidential campaign and has been pushed through Congress by Democrats and a minority of Republicans.
The regulation act puts the financial burden on businesses, Posey said. The overhaul introduces new regulation on derivatives, complex investment mechanisms that bet on future performance of underlying securities. New businesses depend on these derivatives to manage risk, Posey said.
Bob McClure, executive director of Florida think tank James Madison Institute, said that the federal consumer protection agency created by the bill will create new levels of frustrating bureaucracy for state businesses .
It will continue to drive up costs on small businesses, he said.
State creditors would have to clear their loan instruments with the new consumer protection agency and go through a costly and lengthy process, McClure said. It also opens the way for abuse and political cronyism by regulators.
Posey said he does not think any changes to be hammered out in the amendment process will make the overhaul a better deal for the state or the nation.
The general provisions are so far out of whack, I dont see how they can massage things to make them work, he said.
Reach Alex Tiegen at (561) 329-5389 or Alex.Tiegen@gmail.com.
