The year in financial regulation kicked off with some immediate hope for reformers: Reacting to the January election of Republican Scott Brown to fill the late Senator Ted Kennedy's seat, President Barack Obama decided to stake out some populist ground and endorse stiffer bank regulation, including the Volcker rule which limits risky bank trades. While that provision found its way into the final financial reform bill, a plan to tax banks announced at the same time fell by the wayside.
Still, after the passage of health care reform in March, all eyes turned to the Senate's effort to pass a financial overhaul under Banking Committee Chairman Chris Dodd. (The House, lead by Financial Services Committee Chairman Barney Frank, had done their part in 2009). The debate soon focused on how regulators would make rules governing bank behavior, and whether or not the banks would be broken up. Ultimately, Democratic senators who favored aggressive reform and their moderate counter-parts came together to pass a bill that, while not fundamentally shifting the way banks operate, represented a comprehensive overhaul of the financial sector and its regulators.
But the fun didn't end there! Before final passage, the House and Senate met in a chaotic conference committee to iron out the differences in their bills. After much haggling, (and a return to conference when Senator Brown balked at having banks pay for their own failure) the bill was finished! On July 21, President Obama signed [PDF] the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Yet that was not the end of our 2k10 financial reform journey, either! Reform advocates, financial-sector lobbyists and federal officials immediately prepared for the challenge of both the new law and the appointments of those who would enforce it. Reformers scored a victory when the White House appointed Elizabeth Warren, the Harvard Law professor and consumer advocate, to set up the newly-created Consumer Financial Protection Bureau.
This year also saw financial reform efforts go international. Treasury officials, including top financial diplomat Lael Brainard, sought to coordinate policy with major economies around the globe. New rules from the Bank of International Settlements in Basel, Switzerland, were a mixed blessing -- yes, they included higher prudential standards for banks, but are they high enough?
And another crisis is on the horizon. Problems in the mortgage-servicing industry promise to put more pressure on still-fragile banks. Now, people are trying to figure out how this new crisis can be used to help homeowners and fix Treasury's much-maligned anti-foreclosure program.
If all that doesn't get you excited for the new year, here's something else to look forward to in 2011: A legislative battle over the future of housing finance, namely mortgage-giants Fannie Mae and Freddie Mac.
-- Tim Fernholz
(AP Photo/Lauren Victoria Burke)