WASHINGTON, DC – The United States Senate tonight passed important reform legislation to rein in abuse on Wall Street and restore stability to financial markets. The bill contains key mortgage lending reforms championed by Oregon’s Senator Jeff Merkley: a ban on prepayment penalties, “liar” loans issued without supporting documentation, and steering payments to originators for putting borrowers in high-cost mortgages.
Unfortunately, an eleventh hour parliamentarian gambit by Republican leadership blocked a vote on another Merkley measure to restrict the high-risk trading the caused billions in losses costing Americans jobs, homes and savings.
“A year and a half after the financial meltdown that brought our economy to its knees and resulted in billions in taxpayer bailouts, we have finally taken a significant step to reforming Wall Street and protecting consumers from abuses,” said Merkley. “I am pleased that my provisions to end deceptive mortgage lending practices were included in the bill, but I am very disappointed that Wall Street lobbyists were able to block my amendment that would have fully implemented the Volcker Rule and provided integrity in our financial system.”
Last year, Merkley introduced two bills that aimed to end practices at the heart of the foreclosure crisis: prepayment penalties which locked families into bad loans and yield spread premiums which paid loan originators for steering homebuyers into unaffordable, high-interest loans. Merkley was successful in including both measures in the Wall Street reform package as well as provisions that will end “no doc” or “liar” loans where consumers were approved for loans without providing any documentation that they could actually make payments.
Working with Senator Carl Levin of Michigan, Merkley also fought to bring to the floor an amendment that would end high risk trading at the banks our businesses and families depend upon, increase capital requirements for trades at non-banks and prohibit the types of conflicts of interest seen in the recent Goldman Sachs case. Unfortunately, recognizing the amendment would pass and fearing the wrath of voters if they opposed it, the Republican Senate leadership repeatedly blocked a floor vote, ultimately withdrawing one of their own amendments to stop Merkley-Levin.
“If this wasn’t a sign of the Republican leadership siding with the interests of Wall Street over the families and businesses on Main Street, I don’t know what is. Wall Street lobbyists were desperate to block our amendment that would have helped prevent a future financial crisis and bring accountability to our financial markets,” said Merkley. “The underlying reform bill is a good bill but it could have been much better had my amendment been allowed a vote.”