The US Senate has passed a sweeping financial regulatory reform bill, overhauling the regulation of everything from ‘too big to fail’ banks to consumer financial products to exotic instruments such as credit default swaps (CDS) and derivatives. The final bill, more than 2,300 pages in length, directs regulators to create 533 rules, according to the Chamber of Commerce. The bill passed 60 to 39.
The Dodd-Frank bill:
- Creates a new independent watchdog, housed at the Federal Reserve, with the authority to ensure American consumers get clear, accurate information on mortgages, credit cards, and other financial products.
- Ends the possibility that taxpayers will be asked to write a cheque to bail out financial firms that threaten the economy by creating a safe way to liquidate failed financial firms.
- 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.
- Eliminates loopholes that allow risky and abusive practices to go on unnoticed and unregulated – including loopholes for over-the-counter (OTC) derivatives, asset-backed securities, hedge funds, mortgage brokers and payday lenders.
- Provides new rules for transparency and accountability for credit rating agencies to protect investors and businesses.
- Strengthens oversight and empowers regulators to pursue financial fraud, conflicts of interest and manipulation of the system that benefits special interests at the expense of families and businesses.
However, many are not satisfied with the bill in its final form. It orders 68 studies, and leaves major decisions up to regulators prone to lobbying and industry influence.
The Consumer Bankers Association (CBA) stated: “The Dodd-Frank bill is overreaching and will add confusion in the marketplace for all parties involved, especially the consumer. Regrettably, Congress missed a valuable opportunity to comprehensively address the economic crisis, forcing a solution to a problem not yet fully defined. The Consumer Bankers Association looks forward to working with regulators to ensure rules are implemented in a responsible manner.”
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