The financial reform expected to be approved by the US Congress and signed the 4th of July by President Obama will establish a new Consumer Financial Protection Bureau within the Federal Reserve with power to make and enforce rules on financial products, like mortgages, credit cards, and other loans. States will have more power to regulate national banks and the limit on federal deposit insurance will rise to $250,000.
Consumer advocates cry victory against special interests, in particular because they view the reform as partially restoring the ability of states to protect consumers from unfair bank and financial practices, as well as risky mortgage schemes. The bill, among many other things, also imposes a fiduciary duty on brokers when they give investment advice and regulatory oversight of rating credit agencies to promote accountability and improve rating transparency.
What you need to know about the U.S. financial reform bill
New York, June 25.─ A new 10-member oversight panel is being created that has the power to seize and break up big banks deemed “too big to fail.”
Trading in many derivatives, such as the complex securities made up of bundles of home loans that ended up at the heart of the financial crisis, is being forced onto more transparent exchanges. Big banks face curbs on the trading of the riskiest derivatives.a provision known as the Volcker Rule, named for former U.S. Federal Reserve Chairman Paul Volcker, big banks will no longer be allowed to make high-risk bets with their own money, which is known as proprietary trading. As part of that rule no more than 3% of a bank’s core capital can be invested in hedge funds and private-equity firms. Some large banks may be forced to spin off some of their operations to comply with the rule.
In a provision known as the Volcker Rule, named for former U.S. Federal Reserve Chairman Paul Volcker, big banks will no longer be allowed to make high-risk bets with their own money, which is known as proprietary trading. As part of that rule no more than 3% of a bank’s core capital can be invested in hedge funds and private-equity firms. Some large banks may be forced to spin off some of their operations to comply with the rule.A new consumer protection agency is being formed to protect Americans against abuses by credit card issuers and mortgage lenders.
Will the bill lessen the potential for another financial crisis?
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