Three New Jersey Congressmen sit on the House Financial Services Committee – Leonard Lance, John Adler and Scott Garrett ( who can be seen on youtube running away from Zack Fink in 2008 ).
That committee cleared a bill which passed the full House on Friday by a vote of 223 to 202. The bill I am referencing is known as The Wall Street Reform and Consumer Protection Act of 2009. Its the Democrat controlled Congress’s response to last year’s financial meltdown. And the vote reflected the partisan nature of how most of these things are getting done in Washington these days – along party lines. Republicans Garrett and Lance voted against it and Democrat Adler ( last seen voting against his party on health care ) voted for it.
Reached by phone Monday Lance said there were a number of reasons why he voted against it including that it authorizes the creation of a new agency charged with overseeing the financial services industry and protecting consumers. He’d like to see those duties remain with the agencies that already exist such as SEC and FDIC.
What is interesting about this bill is a provision allowing investors to sue credit rating agencies such as Moody’s and Standard & Poor’s. In the aftermath of the financial crisis we heard a lot about the evils of credit default swaps and sub-prime mortgages. But we heard very little about the credit rating agencies turning a blind eye when those toxic mortgages were securitized and sold in great quantities on the open market. Very reputable firms like Lehman Brothers, Bear Stearns and others started trading on those bad assets and the credit rating agencies never pointed out that they did so at their own peril. Did I also mention that some of those financial institutions did this with your money?
Ohio and California have already sued the agencies over public pension losses…so there is some precedent for this. And no doubt lawyers will benefit if individual investors start suing Moody’s. As we know, Democrats always throw a bone to their pals the trial lawyers in big pieces of legislation ( ie – no tort reform in health care bill ).
But it’s an interesting bill nonetheless. Even if its prospects of getting signed into law are slim since the Senate has its hands full with Health Care and eventually the Democratic Congress may wisen up and stop pushing bills that have no bi-partisan support. After all, mid-terms are just around the corner.
It was worth noting though, that someone is finally taking on those credit rating agencies which deserve a good portion of the blame for what went horribly wrong resulting in the loss of Aunt Judy’s retirement fund.