NYT editorial: Real Reform in an Election Year

The White House and Democratic leaders in Congress won’t have much time to savor their victory on health care reform if they hope to achieve the next big goal: enacting financial regulatory reform before the midterm elections. A year and a half after the country’s banking system nearly imploded, it is still operating under the same inadequate rules and regulations.

Unless President Obama throws himself fully into the fight, there is not much chance of pulling this off in an election year, when many lawmakers are more focused on deep-pocketed donors than on the public interest. The House passed a flawed reform bill last year. After months of talks that led to some compromises between Democrats and Republicans, no Republicans voted for the Senate’s version when the banking committee passed it on Monday. That bill, too, is flawed, and the banks are lobbying relentlessly to water it down even more. Here are the areas that must be fixed:

PROTECT CONSUMERS The administration has called for an independent Consumer Financial Protection Agency, with power to police banks and nonbanks for bad lending in mortgages and other forms of consumer debt. Caving to the lenders, the current Senate bill would instead house the new bureau in the Federal Reserve, a diminution of status at odds with robust regulation.

The proposal does take steps to isolate the bureau from Fed influence, including making the new regulator a presidential appointee. But that is a consolation prize for loss of autonomy, not a guarantee of independence. Mr. Obama will also have to push back against the Senate’s proposal to give other regulators the power to veto the agency’s rules in certain circumstances. To protect consumers, the new agency must be truly autonomous and have full rule-making and enforcement authority.

(More here.)