Understanding the Wall Street Bill

21 05 2010

The financial reform and regulation that has been underway in Washington D.C. is, to be honest, overwhelming and confusing. (Similar to the efforts to come up with the Health Reform Bill.) Today, the Senate delivered their 1,600 page final drafts regarding Wall Street reform.

So what does the bill address?

It proposes giving regulators power to break up banks and financial services companies that threaten to weaken the financial industry yet again.

Furthermore, it proposes creating a consumer agency called the Consumer Financial Protection Bureau. The purpose of the agency would be to set rules that would protect customers from unfair practices regarding credit cards and loans.

The Treasury Department will oversee systemic risks on larger firms and will enforce tougher regulation on them.

The bill would not call for the removal of derivatives, but would begin to regulate most through clearinghouses in order to lessen risk.

In addition to that, the bill proposes to limit the investment activities of banks, such as trading derivatives (the swaps’ desks would do this instead). It also mandates that securities rating agencies must provide information that explains how they rate financial services companies. They would face severe consequences such as lawsuits, and losing their official designation in government regulation, if they are irresponsible. Lenders would also have to be able to officially document a borrower’s income to ensure they can repay a loan before issuing it to them.

There are obviously many other areas that are addressed in the 1,600 pages. Do you think that the government reform will stifle the recovery of the financial industry? Or help it?


Lessons from the Recession

17 05 2010

Have you changed anything in your lifestyle during the recession? I know that for myself, I became more thrifty. If I needed to make a major purchase, I did my research and got the best deal possible. I did not make impulsive purchases and I used coupons! I also stuck to a strict budget… and if there was something that I wanted, or needed to get that was not accounted for on the budget, then I moved things around to accommodate it (i.e., no movies that month) or I simply did not get it.

During this time, I told myself that I would learn from the process and continue living on a budget and being frugal with my money. I promised myself that when things started to get better, I would not live beyond my means, and would live wisely within my income. I am grateful that things are starting to look better, yet it makes me wonder, will I fall into the lifestyle of consumerism that is seeming to pick back up, or will I come out of this recession with experience and wisdom?

According to an article on CNNMoney.com, luxury retailers are reporting sales increases. For example, Coach reported an increase of 12% from last quarter. The savings rate in the US is also down at 2.7% from 6.4% over a year ago. Why is everyone so comfortable spending on such non-essentials again?

Some feel that this is not necessarily a surge in excess lifestyle, rather a relief in holding back. For the last couple of years, people have not replaced appliances, cars, computers, etc.. so spending may seem to be increasing – but it is really families are deciding it is okay once again to replace worn out items.

Although the recession was significant, was it enough to make a lasting impact on our lives so that we live within our means and don’t get ourselves into this mess again.

Pressure in Greece, Leads to Pressure at Home

8 05 2010

Wow, the last week has been full of newsworthy situations… the Greece Bailout, and the protests along with it. The elections in the U.K. The financial reform sessions in the Senate. And as a result, the 1,000 point drop in the Dow on Thursday. This dramatic drop can is being viewed as a wake up call for further potential drops based on U.S. debts. Read the rest of this entry »