Polls often find that Congress is held in low esteem, but the House and Senate now are in a position to earn the goodwill of constituents by completing work on a financial reform bill.

In a somewhat bipartisan vote last week, the Senate passed regulations aimed at minimizing the risk of another financial crisis. House and Senate negotiators are now collaborating on a bill that is expected to be ready for the president to sign by July 4.

A key element to this financial overhaul will be a Consumer Protection Bureau, which will oversee mortgage lending. The agency will restrain both lenders and borrowers from generating the kind of unsustainable debt that brought credit markets to the edge of collapse.

The legislation also seeks to avoid future bailouts of firms considered “too big to fail” by providing a system for breaking up financial institutions if they begin to loom as a risk for the economy.

To the dismay of hedge fund managers and investment bankers, it also sets new requirements for the trading of financial derivatives. Unregulated markets in these financial instruments created an incentive to approve high-risk mortgages, and an incentive for traders to bet against them.

Among many other provisions, the House and Senate legislation calls for a high-level council to monitor financial markets and watch for potential threats. By explicitly assigning this responsibility, the financial reform law makes it more likely that we will receive earlier warning of economic trouble.

It took bipartisanship to bring the Senate bill forward, and four Republican senators ended up voting in favor of the bill: Susan Collins and Olympia Snowe of Maine, Scott Brown of Massachusetts and Charles Grassley of Iowa.

Both of Maine’s senators contributed amendments to the bill. Snowe’s corrected potential restrictions on credit for small business. Collins’ required large financial institutions to meet the same capital standards that are required for small banks.

Such bipartisan efforts improved the bill but comprehensive as it is, the Restoring American Financial Stability Act can’t be the last word on financial reform. As Republicans have pointed out, the government has taken over Fannie Mae and Freddie Mac and this ongoing bailout remains a mainstay of the U.S. mortgage market.

Reforms are needed to restore support for financial markets and to help them operate fairly. Once financial confidence fully returns and the economy is back on track, there should be plenty of private investors to support the mortgage market.

— Comments? Questions? Contact Managing Editor Nick Cowenhoven by calling 282-1535, Ext. 327, or via e-mail at nickc@journaltribune.com.