Reining in Wall Street

On July 15, the U.S. Senate passed the Wall Street Reform and Consumer Protection Act by a count of 60 to 39.

The bill reins in Wall Street and protects consumers, investors, and taxpayers from further financial meltdowns.

The landmark bill includes the Consumer Financial Protection Bureau, which is the biggest consumer protection reform since the creation of deposit insurance after the 1929 crash.

Highlights Of Wall Street Reform and Consumer Protection Act

Landmark consumer protection

  • Consumers will have an independent advocate - the Consumer Finance Protection Bureau - on their side to prevent tricks and traps related to mortgages, payday loans and checking accounts.
  • Credit cards and mortgages will offer terms in language we can all understand.
  • Banks will not be allowed to charge businesses hefty fees for debit-card purchases.

Shines light on shadow markets

  • The $600 trillion derivatives market will now operate in the open, so regulators can catch problems before they happen.
  • Most deals will have to be backed up by a separate clearinghouse and traded on public exchanges.
  • Participants will have to prove they have the money to cover their bets. 

Prevents taxpayer bailouts

  • The government will have the authority to step in and safely shut down any failing financial firm.
  • One regulator will be in charge of watching for emerging threats to the entire financial system – and will have the tools and authority to ensure those threats are actually visible.

Reins in the Wall Street casino

  • Banks will be barred from gambling for their own account with your money.
  • Banks will have to separate some of their derivatives trading operations into affiliates.

Mortgage reforms

  • For the first time lenders are prohibited from making loans that borrowers cannot repay, and banned from receiving kickbacks for steering people into high rate loans when they qualify for lower rates.
  • Consumers are protected from abusive loan fees and penalties for prepaying.

Strong investor protections

  • Shareholders will have new tools to hold corporate boards and management accountable.
  • Brokers will have to act in the best interests of their customers.

Holds credit rating agencies accountable

  • Credit rating agencies will no longer have a vested financial interest in giving high ratings to risky investments.
  • Better controls will hold rating agencies accountable for the reliability of their reporting.
  • Investors will be able to sue credit rating agencies who slap a high rating on a risky investment.

Opens the Fed’s books

  • The Fed’s emergency lending programs from the financial crisis will be audited to see where the money went.
  • The Fed will also have to disclose loans it makes to banks through its discount window.

Banks must pay up

  • The largest financial firms have to pay $19 billion to ensure oversight to prevent another financial crisis.

Banks must have “skin in the game”

  • Banks that package loans must keep 5% of the credit risk on their balance sheets.


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