House, Senate lawmakers finalize deal on bank bill-complete massive overhaul of Wall Street rules

[kpete]

Source: Talking Points Memo

House, Senate lawmakers finalize deal on bank bill

House, Senate negotiators complete massive overhaul of Wall Street rules

JIM KUHNHENN
AP News

Jun 25, 2010 07:43 EDT

One year in the making, a sweeping overhaul of Wall Street rules forged in the aftermath of a financial crisis cleared congressional negotiations early Friday and headed to the House and Senate for final votes.

Lawmakers hope to have a bill on President Barack Obama's desk by July 4.

Success came at 5:39 a.m., hours after Obama administration officials helped broker a deal that cracked the last impediment to the bill — a proposal to force banks to spin off their lucrative derivatives trading business.

The legislation, the most ambitious rewrite of financial regulations since the Great Depression, touches on an exhaustive range of financial transactions, from a debit card swipe at a supermarket to the most complex securities deals cut in downtown Manhattan.

Read more: http://www.talkingpointsmemo.com/news/2010/06/house_senate_lawmakers_finalize_deal_on_bank_bill.php?ref=fpblg

---

* The Wall Street Journal boils it down: "Large financial companies are facing a tougher leash." The Journal concludes that the bill is tougher than anticipated.
http://online.wsj.com/article/SB10001424052748703615104575328020013164184.html?mod=WSJ_WSJ_US_News_3

[MARALE]

1. I hope this puts some of the regulation back

I was talking to a guy a few days ago who is a repub, but seemed confused on whether he thought we need more regultion. He kept saying we need better regulation but maybe not more. I said it is hard to have good regulation when you let them regulate themselves. He really did not have an answer for that one.

[Capt. Jack]

2. More Hocus Pocus...

At first glance it appears the Wall Street weasels win again.

http://current.com/news/92508531_educate-america-illegal-foreclosure.htm

Fight back!

http://www.foreclosurehamlet.org

[EJSTES2005]

5. Probably why Financials are the only sector of the market up so far today

This legislation must be really bad for those big bad banks......

[RBInMaine]

3. Like healthcare, this is a START. So please, no bitching. It's better than RePUKE governance.

[RBInMaine]

4. Go ahead RePUKES. Block this one, and watch your party get CRUSHED in November.

[mbperrin]

6. Didn't put Glass-Steagall back, did they? No.

Didn't outlaw naked instruments of any kind, did they? No.

Didn't put in penalties of any kind for egregious criminal conduct by executives, did they? No.

So, banks win (as usual). So glad I haven't had any dealings with the criminals since 1978.

[ProSense]

8. Yes.

The bill is Glass-Steagall 2.0, as Roubini described it in April:

In particular, the congressional bills would require systemically risky financial institutions to (1) pay a fee into a resolution fund for failed institutions, (2) hold less leverage and have greater liquidity, (3) restrict their risk-taking activities (the so-called "Volcker rule," made explicit in the Senate version) and (4) be subject to a resolution process if they fail, one that would resemble the FDIC's current, successful approach for taking over failed banks.

If all these requirements sound familiar, they should - because they roughly mirror the successful protections put in place for deposit insurance in the 1930s. It's a model that worked for generations.

link

Today: Financial Reform Bill Looks Like Game-Changer

But, overall, the Restoring American Financial Stability Act of 2010 is much harder on big banks than anyone had suspected at the start.

<...>

Among the more surprising wins for the anti-Wall Street crowd was passage of the Volcker rule. Named after former Fed chief Paul Volcker, the provision will effectively reinstate the Glass-Steagall Act enacted after the Great Depression -- something that seemed unthinkable just a few months ago.

The provision will disallow big banks from proprietary trading, or making bets with deposits and other liquid assets for their own profit. As a concession, banks will be allowed to own small stakes in hedge funds and private equity shops, since they can't make such investments on their own.

Another controversial measure regarding derivatives went through as well. The new rule, authored by Sen. Blanche Lincoln, will force banks to house riskier derivatives trading in new, freshly capitalized entities, or simply spin them off.

As a result, there will be no more trading of commodity derivatives or the highly complex vehicles that nearly brought down the financial system at any of the top Wall Street firms. This should have a huge impact on the five big banks that handle 97% of derivatives trading in the United States: JPMorgan Chase(JPM), Citigroup(C), Bank of America(BAC), Goldman Sachs(GS) and Morgan Stanley(MS).

[mbperrin]

14. Glass prohibited banks from selling securities. All this does is make

the biggest banks pay in a total of $19 billion to a fund over the next decade. Since they received $800 billion in the most recent bailout, this amounts to a tax of less than 3% of monies received. This bill prohibits no risky behaviors.

It's a win for the industry. Check the market - down overall, but financials are doing great.

There's plenty of hype on this, but it was passed by the same lawmakers who just refused to simply extend unemployment benefits. Raging reform? Hardly. Inch of paint on a quarter inch of steel. It'll float for a while, but the first storm, pfft!

Let me know what you think of this when the industry needs another TARP infusion by Christmas (AFTER the elections).

[liberation]

15. There you go believing facts and your lying eyes...

... that is neither hopeful nor conductive to change.

Because nothing spells "reform" like leaving out of its scope the single most important cause that led to this clusterfuck: derivative-fueled inbreeding of commercial and investment banking. It is like applying suntan lotion to deal with pneumonia in the tropics. Sure, it will help you not get sunburned, which is indeed a clear risk in such latitudes, but that is not the priority when you can't even leave your hotel room because you're coughing your lungs out.

[Mickeyc1004]

17. There are some very good appects of the reform

You said, "it was passed by the same lawmakers who just refused to simply extend unemployment benefits."

However, from what I understand that is not true, the vote was along party lines, and the republicans were the ones who refused to extend unemployment benefits

[mbperrin]

18. What do you like about this reform, please?

Some exact provision, please.

[Mickeyc1004]

19. Here are a few things.

As a consumer:

Creating a consumer agency and the free credit score.

A possible cap on debit card fees.

Loan reform and mortgage reform for unemployed workers.

On the banking side:

An oversight power over financial firms

FDIC has new powers to take down giant financial firms in the same way it takes down banks.

Banks would be taxed to reimburse the federal government for the cost of resolving these firms after a failure occurs.

Regulators given more power to break up banks.

Banks and financial firms will be taxed to pay for cost of implementing the reform.

[mbperrin]

20. Let me take these one at a time:

As a consumer:

Creating a consumer agency and the free credit score. The consumer agency will be part of the Federal Reserve, part of the gang that couldn't shoot straight, so how effective will they be? I don't know. I supported a completely independent agency for the very reason that the Fed has show no inclination to protect consumers at all. The free credit report score is okay, but could have been done in a one line bill - "Upon request by the consumer, credit agencies will provide a credit report score at no charge ___ times a year." Didn't really need 2000 pages for that.

A possible cap on debit card fees. Glad you said a possible cap. If the Fed thinks it's good after they study it for up to a year. Couldn't we have just asked the Fed to do this? It's part of their charter to regulate banks.

Loan reform and mortgage reform for unemployed workers. Yep, ONE billion dollars' worth for the whole country, while Pennsylvania alone used $236 million (about a quarter of that) just for the beginning of ONE state, and not one of the biggest states. So if you get in early and get some, good; there's nowhere near enough to help the MILLIONS of families facing foreclosure, much less the MILLIONS who have already lost their homes while this "dynamic" group of politicians took TWO YEARS to get NEARLY A BILL ready to consider.




I'd like to address your business items when I return from a work detail. Thanks, and thanks for providing details!

[Scurrilous]

7. Obama claims victory in financial overhaul deal

<snip>

"President Barack Obama declared victory Friday after congressional negotiators reached a dawn agreement on a sweeping overhaul of rules overseeing Wall Street.

Lawmakers shook hands on the compromise legislation at 5:39 a.m. after Obama administration officials helped broker a deal that cracked the last impediment to the bill — a proposal to force banks to spin off their lucrative derivatives trading business. The legislation touches on an exhaustive range of financial transactions, from a debit card swipe at a supermarket to the most complex securities deals cut in downtown Manhattan.

Speaking to reporters as he left the White House to attend an economic summit of world leaders in Canada, the president said he was gratified by Congress' work and said the deal included 90 percent of what he had proposed. He said the bill, forged in the aftermath of the 2008 financial meltdown, represents the toughest financial overhaul since the Great Depression.

"We've all seen what happens when there is inadequate oversight and insufficient transparency on Wall Street," he said. "The reforms working their way through Congress will hold Wall Street accountable so we can help prevent another financial crisis like the one that we're still recovering from."

http://www.google.com/hostednews/ap/article/ALeqM5g7ffRdswXTlfgaQS0FCOZmrvbwcAD9GIBG5G0


Obama's remarks on the financial overhaul deal

Text of President Barack Obama's remarks Friday on a compromise that members of Congress reached on overhauling Wall Street rules, as transcribed by the White House.

[OregonBlue]

9. Don't know what to think. Huffington claims it's nothing, BBC claims it tough new regulations.

[tridim]

10. HuffPo works for the status quo, and against Democrats..

So that's not surprising.

[sulphurdunn]

11. Becasue of the Democrats

continued capitulation before filibuster threats by Republicans they have empowered Blue Dogs like Lincoln and Nelson to do the Republicans' dirty work and give the Democrats cover for failing to pass progressive reforms they never wanted to pass anyway but needed to pitch as a PR sop to what remains of their increasingly incredulous base.

[liberation]

12. It is funny, because derivatives which were the main reason behind the current meltdown

have not been touched at all. The big elephant in the room: derivatives and their obligation are now ballooned to sizes which are many times over our actual GDP (i.e. "real worth"). But almost no one in the media or mainstream politics is bothering to mention that, after all capitalism is a game of "confidence" and if you point out the obvious scam... it fails.


This is going to be like that awesome healthcare "reform" which helped "everybody" except actual patients and doctors, and by "everybody" I mean insurance companies.

LOL!

[ProSense]

13. "have not been touched at all. " They most certainly

have been

[mbperrin]

16. From your link:

DERIVATIVES: Would for the first time extend comprehensive regulation to the over-the-counter derivatives market, including the trading of the products and the companies that sell them. Would require many routine derivatives to be traded on exchanges and routed through clearinghouses. Customized swaps could still be traded over-the-counter, but they would have to be reported to central repositories so regulators could get a broader picture of what's going on in the market. Would impose new capital, margin, reporting, record-keeping and business conduct rules on firms that deal in derivatives.

SWAPS SPIN-OFF: Would require banks to spin off only their riskiest derivatives trading operations into affiliates, in a late-night compromise struck to scale back a controversial provision championed by Sen. Blanche Lincoln (D., Ark.). Banks would be able to retain operations for interest-rate swaps, foreign-exchange swaps, and gold and silver swaps among others. Firms would be required to push trading in agriculture, uncleared commodities, most metals, and energy swaps to their affiliates.



So they still trade, but mostly through clearinghouses, although "customized" swaps could still be done over the counter. Prohibits nothing, requires some records. Only the riskiest (determined by whom?) derivatives would be spun off into affiliates. Interest rate, forex, gold and silver would all still be allowed for banks with no changes. This is earthshaking?