U.S. Senate passes financial reform

Washington (News Today) - The U.S. Senate finally passed a landmark reform of Wall Street on Thursday, delivering President Barack Obama's second big legislative victory and ushering in a raft of restrictions on banks.

Mr Obama will next week sign into law the Dodd-Frank Act, bringing to a close a year-long effort to overhaul the U.S. financial system and its regulators. "The American people will never again be asked to foot the bill for Wall Street's mistakes," the president said.

Democrats in the Senate managed to attract three Republicans to secure the minimum 60 votes necessary to bring the debate to a close. A final vote was 60-39 in favor of the bill.

The action on financial reform now switches to the U.S. Treasury and regulatory agencies, which will have to decide which companies should be designated as "systemically significant" and face higher standards of capital and supervision.

Tim Geithner, Treasury secretary, indicated he would use the passage of the law as leverage at the Basel negotiations on new bank capital standards. "I am very confident that with the strong hand this legislation gives us, we're going to be able to bring the world with us in putting in place much stronger capital standards across the financial system,'' he said.

Republicans and bankers have complained that the law perpetuates uncertainty, given the amount of work still to be completed by the regulators. "It creates vast new bureaucracies with little accountability and seriously undermines the competitiveness of the American economy," said Richard Shelby, the senior Republican on the banking committee.

While much of the 2,300-page bill is highly complex, Democrats are trying to craft a political narrative in the run-up to the November mid-term elections that casts them as the consumer champions and the Republicans as the shills for Wall Street.

A new orderly liquidation authority to deal with a future AIG or Lehman without any cost to the taxpayer is widely thought to be the most significant innovation. However, Mr Obama and congressional Democrats have been celebrating the bill's Consumer Financial Protection Bureau.

A toughening of the bill since January, including the introduction of the so-called Volcker Rule to ban proprietary trading, was aided by the Securities and Exchange Commission's fraud charges against Goldman Sachs, which were settled on Thursday.

Ben Bernanke, Federal Reserve chairman, said: "The financial reform legislation approved by Congress today represents a welcome and far-reaching step towards preventing a replay of the recent financial crisis."

Source : CNN

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