This was a vote on passage of legislation designed to prevent the kind of major financial crisis that had recently occurred, and to implement the most significant regulatory reform of the financial industry since the Great Depression.
Among other things, the bill created a new Consumer Financial Protection Agency, strengthened the enforcement abilities of the Federal Trade Commission, included provisions intended to end the potential of federal bailouts to institutions that are “too big to fail", gave shareholders an advisory vote in executive compensation, strengthened the SEC's powers, initiated regulation of sensitive financial instruments known as “derivatives, toughened anti-predatory lending practices, imposed a higher liability standard on the rating agencies, and created a Federal Insurance Office.
Rep. Waxman (D-CA) speaking in support of the bill, referenced hearings he had chaired on the financial crisis. He said the hearings demonstrated that “government regulators were asleep at the switch while Wall Street banks drove our economy off a cliff. Change is necessary, and I believe this legislation will strengthen the federal government's ability to prevent and respond to future crises.”
Rep. Frank (D-MA) chairs the Financial Services Committee, which developed the legislation. He first said that “the lack of regulation over many years allowed big problems to grow up . . . (and this) led to the largest crisis in recent memory since the Depression.” Frank argued that the provisions in the bill impose the kinds of regulations that will not permit that situation to reoccur. He went on to claim: “The Republican proposal is . . . (D)o not interfere with the ability of an AIG, Lehman Brothers, Citicorp, Countrywide or any of those other financial entities. Do not prevent them from doing again what they did before. If and when they have done such a bad job that they are collapsing, then let them go bankrupt and don't do anything to deal with the consequences. Let's have another Lehman Brothers.”
Rep. King (R-IA) opposed the legislation. He said the difference between supporting and opposing it is “the difference between believing the federal government can regulate more aspects of our society, more aspects of our economy, and the difference in believing whether people can become and entities can become too big to be allowed to fail, or whether small businesses might be too small to be allowed to succeed. And it's about the difference between a free enterprise economy and a managed and controlled economy. It's about the difference between liberty and the difference between a socialized economy.”
Rep, Barton (R-TX), another opponent of the legislation, focused on the new Consumer Financial Protection Agency it created. He argued that the “nearly limitless power” given to the new agency by the bill is “questionable at best and tyrannical at worse.” Rep. Royce (R-CA), who also opposed the bill, focused on the powers it gave to regulators “to rescue certain companies and liquidate others . . . to pay off some creditors and counterparties and not others, and keep failed or failing companies operating and competing in the market for years.” Royce claimed “the likely outcome” will be that “larger, politically connected institutions will have the edge over their competitors.” Rep. Lucas (R-OK), another opponent, said the increased regulation it creates will discourage productive new investment.
The vote on final passage was 223-202. All 223”aye” votes were cast by Democrats, including a majority of the most progressive Members. Twenty-seven other Democrats joined all one hundred and seventy-five Republicans and voted “nay”. As a result, the bill implementing the most significant regulatory reform of the financial industry since the Great Depression passed the House and was sent on to the Senate.