JIM LEHRER: The U.S. House today approved the most sweeping overhaul of financial regulation since the Great Depression. And pay limits were extended deeper into executive ranks at companies that the government rescued.
“NewsHour” congressional correspondent Kwame Holman begins our coverage.
KWAME HOLMAN: The vote had been in the works for many months, since the crisis that shook the financial industry last fall and rapidly engulfed the rest of the economy. Lawmakers labored into the night Thursday, before finishing a bill that ran nearly 1,300 pages. This afternoon, it was approved 223-202…
REP. NANCY PELOSI, D-Calif.: The bill is passed.
KWAME HOLMAN: … with every Republican voting no, and all but 27 Democrats voting yes.
REP. JOHN BOEHNER, R-Ohio: All of us recognize there are shortcomings in our financial regulatory system, but I do believe that the overreach by my Democrat colleagues on this bill is really beyond imagination.
REP. BARNEY FRANK, D-Mass.: The American people, we’re told, have said, no more expansion of government — not in the area, certainly, of financial regulations. Their view that the American people want no more restraints on Wall Street is wrong.
KWAME HOLMAN: For the first time, hundreds of trillions of dollars in derivatives would be regulated, including stock futures and credit default swaps.
But a number of businesses were exempted from the restrictions. The bill also sets up a new process to let the government dismantle huge failing institutions before the damage can spread. At the same time, the bill, written largely by Democrats, would make it harder for states to preempt federal consumer laws, even when the state rules are tougher.
The central provision, creation of a new consumer financial protection agency, survived attempts to kill it. Texas Republican Jeb Hensarling insisted it would only make matters worse.
REP. JEB HENSARLING, R-Texas: The Democratic bill fundamentally assaults the economic liberty of the American citizen. It says, now you have to go on bended knee to Washington before you can put a credit card in your wallet or get a mortgage for your home.
KWAME HOLMAN: Democratic leader Steny Hoyer argued, the new agency would prove its worth if it helps prevent another meltdown.
REP. STENY HOYER, D-Md.: Let’s say there is a significant cost. Let’s say it’s a couple of billion dollars. You say $4 billion. Let’s just say, for the sake of argument, a couple billion dollars.
Pales into insignificance in the $1.5 trillion that we have borrowed to get this country out of the deep, deep, deep hole caused by the failure to regulate properly.
KWAME HOLMAN: Democrats tried and failed to let federal bankruptcy judges rewrite mortgages to lower monthly payments. Georgia Democrat Jim Marshall was a co-sponsor of the proposal.
REP. JIM MARSHALL, D-Ga.: Since this is only applicable to existing mortgages, it will have no effect on the cost of future mortgages. All of those folks will be helped by this without putting a single dime of taxpayer dollars in the deal. It seems to me that’s a complete justification for doing this. We should have done it long ago.
KWAME HOLMAN: But Republicans, such as Virginia’s Bob Goodlatte, rejected that argument.
REP. BOB GOODLATTE, R-Va.: The gentleman may claim that it wont affect future borrowers, but the fact of the matter is, if this can be done now for this purpose, the advocates of this legislation would like to see this made in the future a permanent provision in our bankruptcy laws. And it will have the effect of causing interest rates to go up and credit to be less available.
KWAME HOLMAN: The measure now goes to the Senate, which is not expected to act until next year.
While the House was winding up its work, the Obama administration’s so-called pay czar, Kenneth Feinberg, took action of his own. He announced additional caps on salaries at bailed-out companies, following earlier curbs on top executives.
Under the new announcement, mid-level executives will have their pay limited to $500,000. The caps would apply to American International Group, Citigroup, General Motors, and GM’s financial arm, GMAC. They wouldn’t apply to Chrysler and Chrysler Financial, because executives there made less than $500,000.
Bank of America was exempt after it repaid the $45 billion it owed the government. The company is an underwriter of the “NewsHour.”
And Goldman Sachs has repaid its rescue loans. But it said Thursday its top 30 executives wouldn’t receive a cash bonus this year, despite record profits.
Businesses groups, such as the Financial Services Roundtable, objected, the Feinberg plan will cause a brain drain.
SCOTT TALBOTT, senior vice president for government affairs, Financial Services Roundtable: Those employees who feel they are worth more or who the market feels are worth more could end up leaving the companies where the caps are imposed, thereby weakening the company, which injects more risk, not less, and, in the end, could hurt the ability of those companies to restore themselves and help the markets.
KWAME HOLMAN: Bonuses have also been an issue in Europe this week. French President Nicolas Sarkozy said Thursday his country would follow the lead of Britain, which announced a tax on bonuses awarded to bankers between now and April.