So reports the New York Times:

Having passed the Dodd-Frank Act earlier this summer, the bill that aspires to reorder our financial universe in the wake of the most serious economic crisis in generations, Congress has moved on to other matters. Regulators are left to write the rules that will make financial reform a reality — or not — and are beginning that laborious process. ..

The question is this: Will regulators give Wall Street’s big dealers what they want in a second bite of the apple?

There is no doubt that regulating the freewheeling derivatives market is important work. If done right, heightened scrutiny could well eliminate the potential for another disastrous bank run like the one that threatened world markets in September 2008 when the American International Group imploded. The insurer had written insurance on mortgage securities— a derivative known as a credit default swap — and almost collapsed after, among other things, onerous collateral calls from its trading partners drained its cash...

“It is again going back to the battlefield, and this is a much more complicated battlefield...”

“There is going to be so much pressure from the biggest financial institutions not to have limits,” said Heather Slavkin, senior policy adviser of the A.F.L.-C.I.O.’s Office of Investment and a participant in the Aug. 20 meeting. “Regulators are going to be very much focused on what types of swaps get cleared, so the governance and ownership aspects that are just as important may not get the attention they deserve.”

It's not over yet. We must continue to hold the regulators accountable and ensure that they follow both the letter and the spirit of the Wall Street Reform law.

We did it. We passed Wall Street Reform. Now, lenders are no longer rewarded for bad behavior:

It has become fashionable to blame profligate borrowers for the calamity. And there is no question that in the madness of the housing bubble, some people should never have sought mortgages or bought homes they clearly couldn’t afford. But the crisis was driven by Wall Street’s hunger for quick profits and its eagerness to buy mortgages and package them into securities. Banks, mortgage companies, brokers and appraisers all conspired to steer borrowers into loans with escalating interest rates, balloon payments and other conditions that made them highly prone to default.

The new law does not ban risky loans outright. It does establish several conditions that, if correctly implemented, should discourage lenders from issuing them.

Lenders must now take the common-sense precaution of documenting the borrower’s ability to pay. They can no longer penalize borrowers — eager to free themselves from subprime or other risky mortgages — for paying off the loans early. And lenders are forbidden to pay kickbacks — “yield spread premiums” — to brokers who push borrowers into costly, higher-interest loans.

If loans violate the law, borrowers will be able to stop a foreclosure and sue to recover damages. The risk of being hauled into court should persuade investors to look closer at the underlying loans to make sure that they conform with federal law.

These are all good, and desperately needed, reforms. Industry lobbyists, who do some of their best work in the rule-making phase, will work hard to water them down.

Consumer advocates are especially worried about how the Fed will formulate the rules that are supposed to stop lenders from steering creditworthy minority or female applicants into more expensive mortgages and end “wealth stripping,” under which lenders design loans that quickly rob homeowners of their equity.

Congressional leaders believe that the Fed was chastened by the crisis and will now do all that is needed to protect lenders. Given the agency’s long history of kowtowing to the banks, mortgage lenders and credit card companies, Congress will need to do more than trust. It will have to verify that the new rules finally give consumers — and the American economy — the strong, permanent protections they need.

It's time for the Fed to step up. And, if they don't, they must be held accountable.

All across America, voices are speaking up in favor of Elizabeth Warren, a consumer champion, to head up the Consumer Financial Protection Bureau. The Oklahoman profiles Warren:

Warren, an Oklahoma native who is a leading candidate to head the Consumer Financial Protection Bureau that she helped create, has been the target of invective from financial insiders who fear her ideas.

Anton Schutz, president of Mendon Capital Advisers, last week said in a Reuters story: "I get disgusted every time I hear her speak." Warren, 61, is baffled by the invective.

"I have never run into anything like what has happened the past few weeks," she said. "I found myself thinking: So what is it I say? I'd really like the content."

Her goal, she said, is what it has been throughout the 20 years that she's been researching financial data, particularly as they relate to American consumers, whom she believes have been victimized by predatory practices.

"I want to make it so regular families can read a credit card agreement in four or five minutes and fully understand what the terms are. No tricks. No traps. No things that you don't figure out what's happening until after it bites you and they charge you the $39 and raise your interest rate to 29 percent," she said.

Financial insiders point to Warren's lack of industry experience as evidence that she doesn't grasp the complexities of their business or the impact regulatory changes would have.

"I do understand," she said. "It's that we disagree. There are some things that I don't think are all right, and people who are making money off of it think it's just fine."

She gets it. And, that's why hey're scared. They're scared because she'll hold them accountable. Newsweek's Jonathan Alter says it makes political sense:

Republican senators vote along party lines against Obama on almost every issue this side of Afghanistan. Having opposed the consumer bureau, the leadership will do everything it can to weaken it, including opposing Warren. But this particular obstructionism carries a price. The GOP would look horrible going into the fall campaign trashing the one official who has stood up for 200 million credit-card holders against predatory lenders. A few Republican senators (including Snowe, Collins, and Grassley) know this and seem willing to break ranks and oppose a filibuster...

Warren’s fierce independence is exactly what makes the control freaks in the White House uncomfortable. Their doubts about her can be traced to the same economic boys’ club that sniped at FDIC chief Sheila Bair and more recently blocked Laura Tyson, the top economist in the Clinton administration, from being the new head of the Office of Management and Budget. Geithner and Larry Summers aren’t condescending to Warren (anymore), but they prefer other candidates. Their friend Rahm Emanuel is privately worried about her confirmability. Man up, Rahm. If a big fight over Warren comes (and I doubt it will), the battle won’t be a distraction from the Democrats’ fall campaign but the best thing that ever happened to it.

And, Professor Carl Tobias makes the academic argument in the New York Times:

Your editorial accurately states that she has the intelligence, expertise, independence, tenacity, diligence and character as well as the familiarity with how Washington works to head the new Bureau of Financial Consumer Protection.

She has also done the unglamorous, but critical, work of collecting, analyzing and synthesizing empirical data on consumers and credit that would inform her leadership of the fledgling agency and enable it to avoid the pitfalls that plagued the Consumer Product Safety Commission.

Wall Street is against her because she will stand up for us.

...with strong endorsement of Elizabeth Warren:

President Obama should nominate Elizabeth Warren to head the new Bureau of Consumer Financial Protection, and not only because of her credentials . . .

The banks don’t oppose Ms. Warren because she doesn’t get it. They oppose her because she does.

Read the full article.

A must read editorial in today's New York Times argues that the FCIC needs to push harder:

Congress created the Financial Crisis Inquiry Commission last year to investigate the causes of the meltdown. Many banks, financial firms and other witnesses have cooperated. But not Goldman Sachs.

On Monday, Mr. Angelides announced that the panel had finally subpoenaed Goldman. He told reporters that Goldman’s performance had been “abysmal, unacceptable and won’t be countenanced.” He added that it is his job to ensure that the American people are not “played for chumps.”

We couldn’t agree more. We also have to ask what took the commission so long — and hope this new toughness will carry through to a smart and tough report. The commission’s final product is due on Dec. 15. If Goldman’s lawyers think they can play out the clock, Congress had better disabuse them of that notion right now.

If Goldman doesn’t comply, the commission can — and should — ask a court to enforce the subpoena. If Goldman still balks, the court could find Goldman in contempt.

We still don’t know in detail what the crisis panel is hoping to learn from Goldman. In its own disturbing lack of transparency, the panel has not made the subpoena public. A summary on its Web site, posted late Monday, says that it is looking for information on Goldman’s derivatives’ deals and wants to interview Goldman’s top executives and other employees with knowledge of specific transactions. The public clearly has the right to know those details and how they may have contributed to the financial crisis.

The Goldman subpoena is only the latest of many black eyes for the bank, including a civil suit for securities fraud brought by the Securities and Exchange Commission earlier this year.

In the conference call on Monday, the panel’s vice chairman, Bill Thomas, a former chairman of the House Ways and Means Committee, suggested that Goldman’s failure to cooperate indicated that the bank had something to hide. “They may have more to cover up than either we thought or than they told us,” he said. At the least, it suggests that Goldman is still trying to control the narrative of the financial crisis.

That is a prerogative it and all of the banks forfeited when they nearly brought down the financial system and then were bailed out by American taxpayers.

The country needs a full accounting of what went wrong. To do their job, Mr. Angelides, Mr. Thomas and the commission are going to have push a lot harder.

This is a positive step, but, as the New York Times notes, the FCIC needs to push harder.