Financial Regulatory Reform Process Drivers and Effect of Reforms


Financial reforms entail the legislation of control statutes and regulatory institutions that should oversee, control and protect financial institutions, investors and the whole economy at large. These reforms were necessitated by the recent economic crisis that hit America and the world at large-which was the worst since the great depression. The least anticipated economic failure led to closure of some companies such as Bear Stearns and AIG insurers. The general public was unable to handle mortgages that they had already taken which were actually at levels that they could not service. A great extent of these problems can be traced back to financial institutions as well as regulatory bodies that failed to analyze and deliver an early warning.

This problem led loss of jobs, business failures, and house prices fell considerably while savings got wiped out. These unfortunate events occurred because their were no regulatory oversight bodies that were closely monitoring the market and reporting impending risks and setting control measures. This economic crisis happened because there was completely no sincere consumer protection. In turn, this led to deceptive and unfair malpractices that threatened to bring down the whole financial fabric of the nation. The general lack of protection, transparency, accountability, independence an early warning system for systemic risk led to the failure.

Subsequently, it was deemed necessary to initiate the necessary changes that would curb negative practices that could lead to an economic failure (‘Senate Committee’, pp 1-2). The financial reform bill’s debate is still ongoing in the congress. There are hundreds of amendments that have not yet been voted on. However, some have already been passed. Senator Harry Reid filed for cloture mid-May that would have seen the bill passed with the already agreed on reforms. Therefore, the debate on the bill is ongoing and more amendments are yet to be passed. The republicans seem more on the opposition, but; it’s a position they might not hold for long. This is because they definitely fear to be labeled as stumbling blocks against financial reforms. This is because that may tarnish their image to the electorate because they will accuse them of aligning with Wall Street to hinder the reformatory process. If senate passes the measures and they are agreed upon by the house without amendment they will be approved and consequently become law after the president signs them into law. This came to pass as the senate passed the bill that had most of the recommended reforms on May 20th, 2010 (Thaler, n.pag).

The public and media play a big role in voicing concerns of the common citizen. This influences the passing of the bill and its crafting. The passing of the amendments rely on the voting pattern of the two houses in congress. There is no house that would like to be perceived as being against these crucial reforms because this may affect their image to the electorate. The two houses would like to still maintain an energized voter base, and thus; will align themselves with reform sides that seem popular and desirable to the voter population (kemp, n.pag). The bill has so far seen the congressional democrats united unlike during the debate on the health care bill. The pending mid-term election is the biggest concern for the political parties. The seemingly opposing senate republicans know that opposition and apparent alignment along the lines of Wall Street’s interest may not favor them in their campaign efforts. Thus, the campaign may actually shape the reform process due to the significance it bears on how the electorate may vote. Larger organizations such as banks and incorporations are keenly following the process with interest of trying to have legislations that will favor their operations (Kemp, n.pag).

These reforms if passed are bound to further the general interests of the public on the economy and financial stability. However, the groups that may benefit most include the working class as well as the middle class. This class will be advanced better service and help in furthering their small investment effort because there will be more accountable and transparent systems in place (‘Senate Committee’, pp 6-8). This will make it possible for small time investors to invest safely and confidently. The reforms are likely to make the economic environment more stable, and thus; ensure the middle class citizens and the working class does not lose their jobs. This will be of greater advantage because they are the weakest and most vulnerable during economic failures. However, a general overview shows that everybody will ultimately benefit more especially from consumer protection amendments that will see the creation of an independent body that will take care of the interests of the consumers.

As individual citizens it is possible to influence this financial reform process. This can be done by actively participating alongside independent citizen watchdog coalitions and other interest groups working towards the realization of the reforms. Examples of groups actively campaigning for the reforms include the New Jersey Citizen Action and Public citizen litigation group.

 Works Cited.

Kemp, John, Financial reform bill puts GOP in dilemma., April 20, 2010. Web. Monday, June 14, 2010. .

‘Senate Committee on Banking, Housing, and Urban Affairs, Chairman Chris Dodd’, Summary: Restoring American Financial Stability., 2010. Web. Monday, June 14, 2010. <>.

Thaler, H. Richard, Financial Regulatory Reform, 11th 2010. The New York Times. Web. Monday, June 14, 2010. <>.


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