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?




2 responses

30 08 2010

Honestly, I think this bill is just going to make life harder for people and therefore, not improve our economic situation. It may prevent big businesses from taking advantage of the people, but I’m sure they will find loopholes or other ways to get the money they might lose. I have a couple of posts where I give some specifics about how the bill will affect people, banks, and businesses: http://wp.me/pXNVg-1q & http://wp.me/pXNVg-1f

30 08 2010

I agree, the Bill is intensely complicated, and I think will lead to many months and years of further discussion and repercussions. I enjoyed your posts as well. Take Care.

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