After nearly 20 hours of marathon overnight negotiations, Massachusetts Rep. Barney Frank left Capitol Hill early Friday morning with a sweeping overhaul of the finance industry ironed out.
Frank, the chair of the House Financial Services Committee, led the conference committee that agreed on the reconciled bill. It includes deals on the bill's most contentious issues, like regulations on banks' derivatives trading. Frank told WBUR's Bob Oakes he thinks the bill will bring systematic — and long overdue — change to the finance industry.
Intended to prevent a recurrence of the financial meltdown that led to 2008's global economic crisis, the legislation would enhance direct consumer protections and limit banks' riskier trading behaviors.
Frank said the bill will bring a historic increase in consumer safety by creating the Consumer Financial Protection Agency.
"Throughout all of our history, any consumer abuse in the lending area, hidden fees and interest rates that spiral out of control without your having a chance to know about them, they were regulated by the bank regulators," Frank said.
"If we do not see some reduction of profits at some of the largest financial institutions as a result of this bill, I’ve wasted a year."Rep. Barney Frank
Now, Frank said, many of those loans will be illegal — and the agency will help keep them that way.
"We passed a good bill to protect people from credit card abuses," Frank said, referring to the so-called "credit card bill of rights" legislation, which was enacted in May 2009, " but (the banks) immediately came up with new abuses. We now have a system for dealing with that."
Frank said the agency will be empowered to be tough on banks. "If they try to get around the rules, we'll nail 'em," he said.
The most contentious debate of the night revolved around banks' own trading strategies, like derivatives trading, often used by banks and other entities to hedge against market fluctuations.
"They were too removed from reality, they were kind of the financial equivalent of fantasy football," Frank said.
Under the proposed legislation, the riskiest derivatives will have to be spun off as businesses separate from their main holding companies.
Frank says the new bill would also limit government's spending of taxpayer money bailing out large institutions.
"What we say in this bill is, in the first place, if somebody gets to a point where he or she or it can't pay its bills, they're out of business," Frank said.
Frank says the bill's provisions will hurt bottom lines on Wall Street.
"If we do not see some reduction of profits at some of the largest financial institutions as a result of this bill, I've wasted a year," Frank said.
The conference committee vote split across party lines, but Frank doubts a lack of Republican support will hamper the bill's ability to become law.
"Yes, there'll be Republican opposition," Frank said, "but we will have enough votes to pass it."
This program aired on June 25, 2010.