Financial Reform: Can Consumers Be Protected Without Hurting Business?

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L. to R.: Larry Downing / Reuters; Manuel Balce Ceneta / AP

The massive financial-reform bill being debated in the Senate runs more than 1,000 pages and has the potential to reach into many pockets of American life, just like the financial system does. While the marquee provisions directly take on various elements of high finance, like how to wind down a megabank should it start to collapse, other sections would have ramifications far beyond Wall Street. That has led to a robust debate about whether regular companies — the nonfinancial ones that sell goods and services to people — are going to suffer more than they'll gain.

The answer depends on whom you ask. Politicians have been out in full force arguing both sides of the issue. Senate Republican leader Mitch McConnell has twice taken the Senate floor in the past week to outline the concerns of companies that would ostensibly see their oversight and costs increase. In his big speech on financial reform last month, President Obama laid out the opposing point of view: if the financial system from top to bottom is more transparent and easier to understand, then companies can compete more fairly on the merits of their products and services.

The truth is, people who run companies, from small businesses to massive corporations, are split on whether the effects of the new legislation would add up to a net benefit to or a net drain on their operations and profits. That reflects the inherent tension of any sort of regulation — making the overall system safer means constraining what certain individual players are allowed to do.

Consider the proposed Consumer Financial Protection Agency, which would examine and regulate financial products from an ordinary person's point of view. More than 100 auto-dealer owners went to Capitol Hill last week to argue that they should be exempt from the proposed new agency's oversight. Their argument: they simply help people find car loans, like a mortgage broker would with a home loan, but don't do the financing themselves.

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