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Netto Azure July 15th, 2010 12:42 PM

US financial reform passed by Senate
 
US financial reform passed by Senate

http://news.bbcimg.co.uk/media/images/48376000/jpg/_48376806_009688461-1.jpg
The reforms are designed to prevent future financial crises


Quote:

The US Senate has approved a landmark bill designed to overhaul the US financial system, by 60 votes to 39.
Earlier this month, the reform bill was passed by the US House of Representatives.


The vote is the culmination of months of political wrangling after President Obama committed to overhaul the banking sector after the 2008 financial crisis.
The reforms are designed to reduce the risks that banks take and prevent future crises.
Consumer protection They have been described by US Treasury Secretary Tim Geithner as "the most sweeping set of financial reforms since those that followed the Great Depression".
The legislation creates a new federal agency designed to oversee consumer lending and outlines new regulations for complex financial instruments.
To this end, it will set up a powerful consumer financial protection bureau, with powers to clamp down on abusive practices by credit card companies and mortgage lenders.
Large banks will also be required to increase the amount of capital they hold in reserve against loans going bad.
However, they will only be forced to do so after five years, as the government is keen that banks do not hold back on lending money during the economic recovery.
The bill also introduces the so-called Volcker rule - named after the former Federal Reserve chairman Paul Volcker, who proposed it.
Banks will be banned from what is called proprietary trading - effectively taking bets on financial markets using its own money.
They will also be limited to investing a maximum of 3% of their capital in speculative businesses such as hedge funds or private equity funds.
Although this bill is so watered down like the Health Care legislation...it's what you get when things are compromised to pass.

Bay July 15th, 2010 12:54 PM

I like how the reform did something about propriety trading. Yeah, for quite some time the banks made big bets, causing the capital to go down quick. Also glad there's an agency overlooking the finanical instruments like derivatives. That's one of the things that caused the financial crisis in the first place. >.>

Kinda bit iffy on the banks don't need to keep reserves until five years later, though. It's kinda a bit too long for me. Then again, it's unclear how the economy will go the next couple of years, so I guess five years should be a good enough time to have the banks get their act together.

Netto Azure July 21st, 2010 11:11 AM


Quote:

President Barack Obama has signed into law the biggest overhaul of American financial regulation in decades.
The president said the law will ensure "that everyone follows the same set of rules, so that firms compete on price and quality, not tricks and traps".

The law is a major victory for Mr Obama and the Democrats, who passed it with little Republican support after months of political wrangling.
It was vehemently opposed by the financial services industry.

Several provisions are intended to eliminate government bailouts by dealing with an issue known as "too big to fail", where a financial firm cannot be allowed to collapse because of the wider damage it would do.
There are provisions to enable regulators to shut down a failing large firm in an orderly manner and others intended to curtail their size in the first place.
These and other measures probably do reduce the risks of bailouts being needed, but in the end, future governments will most likely come to the rescue if the danger to the wider economy seems great.
For critics, the big omission is the two housing finance companies, known as Fannie Mae and Freddie Mac, which were rescued by the government and which had some role in the crisis. The administration plans to reform them later.

But Mr Obama described the bill as a necessary measure to prevent future economic disaster, saying world's current economic troubles were caused in large part by "a breakdown in our financial system" and "a failure of responsibility from certain corners of Wall Street to the halls of power in Washington".
"Our financial system only works - our markets are only free - when there are clear rules and basic safeguards that prevent abuse, that check excess, that ensure that it is more profitable to play by the rules than to game the system," Mr Obama said at the White House.
In a note of irony, Obama signed the bill with great fanfare in the massive Ronald Reagan Building, named after a president who championed deregulation.
To a burst of applause, the president said: "Because of this law, the American people will never again be asked to foot the bill for Wall Street's mistakes."
Well now that it is law...get ready for the barrage of lobbyists going to the executive regulators who will actually implement the law.

But as we all know, these will be scaled back sometime in the future...as usual.

SBaby July 22nd, 2010 8:36 AM

Well, we'll see if we really won't ever have to 'foot the bill' for Wall Street's mistakes again. I find that part hard to believe. But, stranger things have happened (reference the War of 1812). The part that really has me worried though (and should have everyone worried) is that now he has the power to essentially break up any company that he considers to be too big (or so large that it's causing economic problems). I can guess a few companies that might be potential targets of this in the future.

Quote:

Originally Posted by Bay Alexison (Post 5972259)

Kinda bit iffy on the banks don't need to keep reserves until five years later, though. It's kinda a bit too long for me.

Strange that so many of these laws are going into effect years down the road AFTER he's out of office, almost like he doesn't want to be there when it happens...

Netto Azure July 22nd, 2010 8:42 AM

Who is this "He" you are speaking of?

The Federal Reserve, which is independent of the Executive is the one being given the powers that are in line with what the FDIC has. :/

SBaby July 22nd, 2010 9:03 AM

Quote:

Originally Posted by Netto Azure (Post 5993256)
Who is this "He" you are speaking of?

The Federal Reserve, which is independent of the Executive is the one being given the powers that are in line with what the FDIC has. :/

That's what I meant. I was just in a hurry to type all that before my computer decided to go crazy from the weather again. The point is, they can shut down or break up essentially any company they want now by saying it's too big or that it's too harmful to the economy.

Red1530 July 22nd, 2010 7:23 PM

We did not need a new law to reform Wall Street. Congress should of re-instated the Glass Steagall Act. Had this law not been repealed it would of mitigated the damage from the real estate collapse. This bill will set up a permanent system to bail out "too big to fail" companies instead of letting them go into Chapter 7 or 11 bankruptcy. Finally this new law does not touch the Fanni Mae and Freddie Mac bailouts.

Netto Azure July 23rd, 2010 9:53 AM

Quote:

Originally Posted by Red1530 (Post 5994715)
We did not need a new law to reform Wall Street. Congress should of re-instated the Glass Steagall Act. Had this law not been repealed it would of mitigated the damage from the real estate collapse. This bill will set up a permanent system to bail out "too big to fail" companies instead of letting them go into Chapter 7 or 11 bankruptcy. Finally this new law does not touch the Fanni Mae and Freddie Mac bailouts.

True enough. Having that firewall would have seriously barred some of the more exotic stuff from the Commercial Banks.

But alas, even reinstatement of Glass-Steagall under the guise of the Volker Rule was watered down significantly by the powers that be.


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