It took a long while, but Congress has a completed financial regulation bill on the table. It falls short of a few of the original proposals, but at least there’s some there there.
Some highlights from the fact sheet provided by the Senate Banking Committee:
Ends Too Big to Fail: Ends the possibility that taxpayers will be asked to write a check to bail out financial firms that threaten the economy by: creating a safe way to liquidate failed financial firms; imposing tough new capital and leverage requirements that make it undesirable to get too big; updating the Fed’s authority to allow system-wide support but no longer prop up individual firms; and establishing rigorous standards and supervision to protect the economy and American consumers, investors and businesses.
Advanced Warning System: Creates a council to identify and address systemic risks posed by large, complex companies, products, and activities before they threaten the stability of the economy.
Transparency & Accountability for Exotic Instruments: Eliminates loopholes that allow risky and abusive practices to go on unnoticed and unregulated – including loopholes for over-the-counter derivatives, asset-backed securities, hedge funds, mortgage brokers and payday lenders.
It’s likely that other loopholes will be form, an inherent aspect of regulation. The most important thing will be the regulators themselves — will they be vigilant?
It also still remains to be seen whether this bill gets through Congress without getting shredded. From the New York Times:
The major flashpoints will include, among other things, the scope of authority for a new Consumer Financial Protection Bill to be established within the Fed; the scope of exemptions under new rules governing the trade of derivatives; and the mechanism by which the government could seize and dismantle a large company on the verge of failure.
Another provision is one intended to curb Wall Street’s influence over the Federal Reserve Bank of New York. Its president would be appointed by the president of the United States, not by a board that includes representatives of member banks.
Mr. Dodd estimated that there was substantial bipartisan agreement on 9 of the bill’s 11 titles, the exceptions being consumer protection and corporate governance.
The CFPA would exist within the confines of the Fed, but would have an independent director appointed by the President and confirmed by the Senate. It would also have an independent budget and an autonomous ability to write consumer protection rules.
Here was Elizabeth Warren’s comment:
“Despite the banks’ ferocious lobbying for business as usual, Chairman Dodd took an important step today by advancing new laws to prevent the next crisis. We’re now heading toward a series of votes in which the choice will be clear: families or banks.”
Hear more on the bill tonight on Marketplace.
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