The Wall Street Reform and Consumer Protection Act of 2009

The House Financial Services Committee announced December 2, 2009 that it has finished its work on the bills designed to reform the regulation of the financial services industry. The nine bills approved by the committee have been packaged into a single bill, The Wall Street Reform and Consumer Protection Act (H.R. 4173), which is scheduled for House floor debate during the week of Dec. 7, 2009. Provisions of the bill include:

• a new Consumer Financial Protection Agency with seven legal and law-related offices;
• a new Consumer Financial Protection Oversight Board;
• a new Financial Services Oversight Council to monitor systemic risk (the Federal Reserve Board is supposed to do this now (we all know how that worked!), and would still do it under this bill;
• a new Federal Insurance Office in the Treasury Department;
• a new Systemic Dissolution Authority in the Federal Deposit Insurance Corporation (FDIC);
• a new Office of Resolution in the FDIC, which would be triggered by certain future events;
• 21 (not a misprint) new Offices of Minority and Women Inclusion;
• a new Capital Markets Safety Board within the SEC;
• a new Ombudsman Office within the SEC;
• Compliance officers within each self-regulatory organization (SRO) that is a clearing organization supervised by the SEC;
• a statistical ratings agency oversight office within the SEC;
• a new whistleblower protection office within the SEC;
• a new Ombudsman Office within the Public Company Accounting Oversight Board;
• the authority to dissolve large, failing financial institutions;
• restrictions on executive compensation;
• enhanced investor protections;
• regulation of derivatives;
• mortgage and predatory lending reforms;
• credit rating agency regulation; and
• hedge fund and private equity regulation.

 This omnibus aggregation of financial regulatory reform bills shows Congress at both its best and its worst. Congress has crafted yet another in a long series of thousand-plus page pieces of legislation (this bill is 1279 pages long) that appear now to be the norm whenever Congress tackles a major issue. The legislation would both reform and vastly expand federal regulatory authority over the financial services industry, conferring enormous powers on federal regulators far beyond anything to date.

No matter that few can lift the bill, and no one should be condemned to read it from start to finish.

The biggest downside is that the bill largely (1) leaves intact the current financial regulatory mess, marked by too many regulatory agencies who compete with each other and afford regulated entities the opportunity to "shop" for the most lenient regulator, while (2) adding new regulatory agencies on top of the multitude of existing ones.

The taxpayer's downside is the lawyers upside. The bill would likely a substantial number of new public sector job opportunities as well as thousands in the private sector. Attorney and law-related jobs would be added at every federal financial regulatory agency (with one exception – the Office of Thrift Supervision, which would become a division reporting to the Comptroller of the Currency), including:

• Department of Treasury
• Federal Reserve Board
• Comptroller of the Currency
• Securities and Exchange Commission
• Federal Deposit Insurance Corporation
• Federal Housing Finance Agency
• National Credit Union Administration
• Commodity Futures Trading Commission
• Federal Trade Commission
• Department of Justice
• Government Accountability Office
• Public Company Accounting Oversight Board (an SEC SRO)

The SEC would receive authority and funds that it could grant to states to go after defrauders of senior citizens. It is also likely that state insurance commissions, bank supervisory agencies, and securities regulators would also need more attorneys.

The Senate counterpart to this bill differs somewhat from the House version, but contains a number of similar law job-creation initiatives.

As Thomas Jefferson once said: "A camel is a horse designed by committee." Never was that statement more appropriate.