Policy Points: H.R. 3590 and H.R. 4173

by Mike

On the policy side of things, two interesting events took place yesterday: 1) The Center for Medicare and Medicaid, Office of the Actuary released a somewhat detailed cost estimate of H.R. 3590, better known as The Patient Protection and Affordable Care Act of 2009. and 2) The House of Representatives passed H.R. 4173, The Wall Street Reform and Consumer Protection Act of 2009. Don’t you feel better with all this legislative “protection” flying around?

The Patient Protection and Affordable Care Act of 2009

Here is low intensive summation on the cost of the Senate’s “compromise”

As with all things how you interpret this is solely based on your view of the world an politics. Nevertheless, here are the sticking points in the Actuary’s own words.

  • The PPACA would reduce the number of uninsured from 57 million to 24 million. Presumably, the 57 million number is including Medicaid and or Medicare recipients added into the supposed 47 million uninsured. (Page 3) Or, 93% of the population of the United States.
  • The Actuary estimates that about the number of people employer-sponsored health insurance would decrease by 5 million. (Page 3) They do not make a distinction as to whether or not this is actually decrease by choice or forced to lose.
  • Ironically, the PPACA will not offset the expense of total health care expenditures. In fact, by 2019 it will increase it by .7% or $234 billion. (Page 4) Right now, total health care expenditures per year in the US are about $2.5-2.7 trillion.
  • Federal expenditures under this bill would increase by $930 billion in net costs from 2010-19. However this is offset by $493 billion from cuts to Medicare, $36 billion in net savings from Medicare/CHIP, $7 billion in insurance reforms and health care expenditures, and $38 billion in savings from the CLASS proposal. After deductions of net savings cost is, as noted in the chart above, government spending increase to $366 billion over a ten year period. (Page 4)

The saddest part to all of this is that in order to offset the cost of adding those people who are 133% above the FPL (Federal Poverty Line), versus the original 100%, to the Medicaid rolls ($364.3 billion), Medicaer is being slashed by $493 billion. Robbing Peter to pay for Paul is not reform, it is a shell game. In addition, this doesn’t even accomplish the goals of lowering health care expenditures nor does it provide low cost insurance alternatives to 100% of Americans.

Also, if you noticed this is just the first four pages of a 34 page document. I am sure there will be more to come when the experts take a deeper look into this.

(Source: The New Republic)

The Wall Street Reform and Consumer Protection Act of 2009

Simply put this 1279-page piece of legislationrewrites the rules governing financial markets, restricting the operations of big banks and the powers of the Federal Reserve.”

Here are some highlights of what the bill accomplishes provided by the Wall Street Journal.

  • Creates a Consumer Financial Protection Agency to oversee financial products and services.
  • Establishes a council of federal regulators to oversee firms gauged to be systemically important.
  • Allows the government to wind down and dismantle large, failing financial firms.
  • Gives shareholders an advisory vote on executive compensation packages.
  • Merges the Office of the Comptroller of the Currency and Office of Thrift Supervision into a single national bank regulator.
  • Requires hedge funds and private equity firms to register with the Securities and Exchange Commission.
  • Creates a Federal Insurance Office within the Treasury Department.
  • Requires dealer banks and major swap traders to trade some of their routine products on transparent platforms and steer the swaps into clearinghouses, which guarantee trades.
  • Exempts many commercial companies that use swaps to hedge risks from the clearing and trading provisions or having to post margin on uncleared, customized trades.
  • Gives the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission new police powers for over-the-counter derivatives and lets the CFTC set trading limits on swaps that play a role in setting market prices.
  • Imposes new capital, margin, reporting, record-keeping and business conduct standards on swap dealers and major swap traders.
  • Prevents bank dealers and major traders from collectively owning more than a 20% controlling stake in swap clearinghouses or trading platforms
  • Establishes a “dissolution fund” to pay the government’s costs for winding down a large failing institution. Fund would be paid for by banks and financial firms
  • Allows the government to require secured creditors to take a 10% loss if the government has to take over a failing financial firm.
  • Uses $3 billion of funds from the Troubled Asset Relief Program to help reduce the risk of foreclosures among the unemployed.
  • Expands the 10% domestic deposit cap to include thrift deposits.
  • Preserves the ability of the federal government to preempt state laws in certain circumstances.

Here is a little breakdown on the winners and losers also provided by the WSJ.


The Big Banks would be subjected to higher capital and liquidity standards. Meantime, the government would be allowed to break up even healthy large institutions that were deemed a threat to the broader economy.

Hedge Funds and other alternatives investment firms have to register with the Securities and Exchange Commission, exposing their below-the-radar investment strategies to greater public scrutiny.

Goldman Sachs, JP Morgan, Morgan Stanley and other large securities firms that use the company’s own money to trade in stocks and commodities, or so-called proprietary trading. The bill would prohibit proprietary trading if it put the firm’s safety and soundness at risk. The bill would allow for exemptions if the trading is done for hedging risk or for other reasons that would be determined by the newly established Financial Services Oversight Council.

The Office of Thrift Supervision: It would be abolished.

Big banks seeking to get even bigger: The Federal Reserve will not approve any merger that it thinks will pose a risk to the financial system. The Federal Reserve also needs to approve any bank acquiring a non financial company with assets greater than $25 billion.


Mortgage lenders including the largest companies such as JP Morgan and Bank of America: The bill does not allow for so-called “cram downs,’’ which would give bankruptcy judges the right to adjust the terms of first mortgages.

Credit and debit card users: The bill would create a Financial Consumer Protection Agency to monitor lending practices , presumably keeping an eye on “teaser rates ” and overdraft fees on debit cards.

General Electric: The company won a concession in the bill to keep its financing arm, GE Capital. An earlier White House financial overhaul proposal, which wanted all lenders to fall under the same regulatory orbit as regular banks, would have likely required GE to sell its large financial unit.

Regulators: While the OTS would be abolished, the bill creates two new agencies, the consumer protection agency and the Financial Services Oversight Council, which monitors financial institutions to prevent them from posing systemic risk. The bill also boosts fees for banks with $10 billion or more in assets must pay to the FDIC to defray costs of bank examinations.

Personally I like the consumer protection aspects of the bill, the capital and liquidity requirements for banks, and the reporting of hedge fund investments to the STC. However, the Securities and Trade Commission utterly missed the Madoff scandal and the federal government already has an abysmal record at consumer protection. So I am not sure how effective they will be in these two situations.

Aside from needless fees being imposed on financial institutions and creating more layers of bureaucracy, the rest of this bill seems to be nothing more than an attempt at undoing the Gramm-Leach-Bliley Act of 1999. This was seen as the final nail in the coffin of the antiquated New Deal legislation known as the Glass–Steagall Act of 1933. The Left has not only tried to undo Gramm-Leach-Bliley for several years now, they primarily used it as the blame for the 2008 economic collapse. It now seems they have succeeded in dismantling it, at least in the House.

Related Articles:

For a detailed and easy to understand reading on how the derivatives market works, along with the possible effects of this legislation, visit E21 and read their post, A Risky Effort to Mitigate Risk.

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About Mike Elliot

Works in Construction Engineering and Project Management. Mike has been employed by the federal government and worked extensively within the private sector as well. His interests include public policy, economics, politics, foreign policy, philosophy and other assorted mind-numbing practices. Mike can be contacted, complimented, or criticized at twe.mike@gmail.com. He is also available for speaking engagements and prefers to be paid in gum.
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3 Responses to Policy Points: H.R. 3590 and H.R. 4173

  1. Tom Degan says:

    Don’t hold your breath waiting for whole chapters to be written about HR 4173 in the history books. The Civil Rights Act of 1964 it ain’t. This proposed new law is so riddled with loopholes it might as well be rendered next-to-useless. It was passed 223 to 202 – with not one Republican legislator voting in favor of it. Not one. Even a law as watered down as this one is unacceptable to these fools. That fact alone illustrates more than any other the moral bankruptcy of that hideous party.

    HR 4173 is merely a baby step in the right direction. For three long decades these knuckleheads were permitted – by law – to run roughshod over our economy, looting our national treasure in the process. As Sam Cooke once sang, “a change is gonna come”. So much more needs to be done. So many old laws need to be re-instituted. Imagine cleaning up a blood bath with a Kleenex. That is basically what HR 4173 amounts to.


    Tom Degan
    Goshen, NY

  2. Mike says:

    I think I feel a “sub-prime” debate a brewin’.

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