WASHINGTON — Amy Klobuchar and Al Franken are proposing a raft of amendments to the Senate’s financial reform bill that would, if all approved, significantly strengthen the bill (and shift it dramatically to the left) through increased federal oversight of the financial sector.
“Working Americans together have lost nearly 4 trillion dollars in the value of their homes, and about 3 trillion dollars in the loss of their retirement savings during this economic crisis,” Franken said on the Senate floor Friday. “The Wall Street reform bill before us goes a long way to prevent this from ever happening again, but there are a few places where it can be improved.”
“We’re still working on the details of the bill,” Klobuchar said Thursday, noting she was preparing for all-night amendment-a-thons if needed to move the bill by the tentative deadline of Memorial Day. That would allow enough time for the House and Senate to come to an agreement in the four weeks between the end of the Memorial Day recess and July 4, as well as clear the floor for the Senate confirmation of Supreme Court nominee Elena Kagan.
Their moves come as Senate leaders continue to debate exactly how the financial bill will move forward. Republicans have said a compromise bill would pass overwhelmingly, with perhaps as many as 80 votes (though Klobuchar has predicted a near-unanimous vote in favor). Some Democrats, however, are pushing for the strongest bill possible in the belief that Republicans simply couldn’t vote against the final measure in an election year.
The final bill is currently on track to land somewhere in the middle, given that 60 votes just aren’t there to toughen the bill as much as some would like.
The toughest amendment to date would have capped bank deposits at 10 percent of the total insured deposits in America while also imposing limits on how much money can be leveraged at any one time. The practical effect of that is that the nation’s three largest banks would have been forcibly downsized.
That amendment was defeated in a 33-61 vote that split the Minnesota delegation – Franken in favor and Klobuchar against.
The amendments will be legion, Senate insiders predicted, and this week’s group will start off with a bang today. That’s when the Senate will consider a softened version of an amendment to audit the Federal Reserve. It would require the Fed to release detailed records about whom it helped rescue during the financial crisis, the outlays, terms of repayment, etc., but stop short of a full, independent audit.
Staffers said Klobuchar will focus her efforts on two amendments, one on predatory lending and the other on maintaining the scope of the Federal Reserve system. Both amendments, she said, are an effort to address “complex and deceitful lending practices” that “were at the heart of the financial crisis.”
“As we work to reform Wall Street, we must ensure that the homes and home equity of Americans are not put at unnecessary risk,” Klobuchar said. “These common-sense protections, modeled after Minnesota law, implement key safeguards so consumers can obtain a sound loan and are essential to restoring our economy.”
Klobuchar’s predatory lending amendment is based on a Minnesota law that essentially requires mortgage lenders to verify that the borrower can actually afford their payments before they’re approved for a loan. That “payment” is not just principal and interest, but taxes, insurance and any assessments and/or mortgage insurance premiums that might be required.
Lenders would also have to verify income and assets, and would be forbidden from steering borrowers to “rates, charges, principal amount or prepayment terms that are more expensive than those for which they can qualify.”
The Senate’s bill, as it currently stands, would restrict the Federal Reserve to only regulating the nation’s largest banks. Klobuchar’s second amendment, which she has cosponsored with Texas Republican Kay Bailey Hutchison, would delete that change.
The biggest change under any of the amendments would come with a Franken amendment on credit rating agency reform.
Currently, firms hire their own ratings agencies, a process Franken says leads to shopping by large financial firms for the ratings agency they know in advance will give them the best rating. It’s a shell game, he said, that led to subprime loans being classified as safe, AAA-rated investments – some 93 percent of subprime loans rated as AAA before the financial crisis are now in junk status, Franken’s office said.
Franken’s measure would add a new ratings agency commission that would assign a ratings agency to rate any new financial product. How that assignment would be made – randomly, or if some preference would be given to those with a better track record – is a decision that would be left to the new commission.
That measure received a massive boost Friday when conservative Mississippi Republican Roger Wicker signed on as the amendment’s first bipartisan cosponsor. (More on that here.)
Another Franken amendment, this one with Maine Republican Olympia Snowe, would establish a sort of homeowner’s ombudsman to help sort through mortgage modification requests.
Reports obtained by ProPublica show that more than 65 percent of loans that are eligible for the administration’s foreclosure prevention program because the homeowner is at least 60 days behind in payments aren’t being addressed. At U.S. Bank, for example, just 27 percent of eligible loans are going through that process.
The new Office of the Homeowner Advocate would serve as a venue not just for answering questions and speeding up paperwork, but also for appealing decisions made by lenders. It has garnered opposition from the financial sector, but praise from the White House.
White House Communications Director Dan Pfeiffer included Franken’s homeowner advocate on a list of the administration’s top 10 recommended amendments, calling it a “simple, straightforward” amendment “that would further strengthen an already strong bill and really help American families.”
The other amendments Franken is co-sponsoring would:
- Remove federal antitrust exemptions from health insurance providers;
- Allow civil lawsuits not just against those who violate securities trading regulations, but also those who “aid and abet” those breaking the law; and
- Cap interest on consumer credit transactions at whatever the relative state laws allow.
Al Franken’s accidental wooing of Roger Wicker
By Derek Wallbank | Monday, May 10
WASHINGTON — One of the hardest steps to advancing a potentially controversial amendment in the Senate is securing that must-have Republican cosponsor. Sometimes, however, it’s simply a case of being in the right place at the right time. Thursday evening was one of those times.