WASHINGTON _ The broadest revamp of financial regulation in seven decades cleared a key congressional committee Wednesday and will move next week to debate on the floor of the House of Representatives.
On a 31-27 party-line vote, the House Financial Services Committee passed the Financial Stability Improvement Act.
The measure addresses much of what led to the recent financial crisis, including insufficient government powers to shut down in an orderly fashion huge financial firms that are deemed too big to fail because they’re interconnected globally.
The committee bill would create so-called “resolution authority,” allowing the federal government to dismantle such huge financial firms, which it was unable to do when Lehman Brothers collapsed in September 2008.
Days later, the Federal Reserve used creative tools of questionable legality to save insurer American International Group and pay off its biggest creditors, which were mainly Wall Street banks.
“They had two choices: They pay nobody and you get a Lehman Brothers freeze on the economy, or an AIG, where you pay off everybody and piss off America,” said Rep. Barney Frank, D-Mass., the chairman of the committee that drafted the bill.
After the vote, Frank was confident of House passage. Debate tentatively is scheduled to begin next Wednesday. His bill would provide the first-ever regulation of the complex financial transactions called derivatives and a new agency to protect investors and the consumers of credit products.
The Senate Banking Committee begins marking up its version of the legislation this month.
