Sen. Judd Gregg, R-N.H., has a very harsh view of the financial reform bill passed by the Senate last week, calling it a "disaster."
“The bill is a disaster because it doesn’t address the fundamental underlining causes of the economic issue, which were real estate and underwriting,” he says.
“This bill became, ‘I want to score the most points against Wall Street.’ Most of the initiative of this bill wasn’t directed at solving the problem, but it was directed at scoring political points,” he recently told CNBC.
The Senate version of financial reform was approved late last week and must now be reconciled with the House version before it is signed into law by President Barack Obama.
He said the proposed consumer protection agency will extend the footprint of government and spark conflicts with the banking industry.
Gregg proposed underwriting standards in tandem with Sen. Bob Corker, R-Tenn., that weren’t included in the bill.
“You’ll basically have a consumer protection agency which decides to go out and in the morning and say, ‘Well everybody who’s XYZ should have a loan, even though the local community bank says XYZ shouldn’t have a loan, because if we give them a loan, we know they’re not going to pay back,’” he said.
“It’s going to become an agency that defines lending on social justice purposes instead of safety and soundness purposes.”
Gregg’s also upset that the bill doesn’t reform Fannie Mae and Freddie Mac. “The failure to take on Fannie and Freddie is almost malfeasance of a criminal level,” he said.
Star bank analyst Meredith Whitney also is pessimistic about regulatory reform.
“Politicians have proven far worse than our worst expectations. It (the financial reform bill) could be very bad for banks."
She told Bloomberg that continued housing and consumer credit woes will hurt banks.
After the Senate passed the bill late last week, Obama said the final version of the bill would hold financial firms accountable but not stifle the free market.
"Over the last year, the financial industry has repeatedly tried to end this reform with hordes of lobbyists and millions of dollars in ads, and when they couldn't kill it they tried to water it down. ... I think it's fair to say these efforts have failed," Obama said.
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