Haggling over financial reform went on long into the night on Thursday, with pressure to present a finalized bill in time for the G-20
Now, the bill has reached its final form to be approved in the House and Senate. What's in it, and have the strong provisions survived? Here's the analysis, which, at least for the first round, is somewhat critical of the bill's compromises, while recognizing its historic magnitude.
- Volcker Rule, Cap on Hedge Fund Investing, Tax to Pay for Bill "A watered-down ban of
proprietary trading, also known as the Volcker Rule, passed," explains
The Atlantic's Daniel Indiviglio
in a 5:30 a.m. breakdown. House Republicans worry that, without other
nations enacting similar policies, U.S. competitiveness will take a
hit. "The final version of the rule would allow banks to participate in
private equity and hedge funds up to 3% of their tier 1 capital. They
could only, however, have up to 3% ownership of any private equity or
hedge fund." There's also a "conflict-of-interest provision ... which
was inspired by the Goldman-SEC case." The bill will cost $22 billion
over 10 years. "Part of that will be paid for by the Securities and
Exchange Commission. The remainder, between $15 billion and $19
billion, be paid for by a tax on the financial industry."
- A 'Massive Overhaul' With Compromises "While many tough provisions in the bill survived," writes Jim Kuhnhenn in
the AP report, "securing the votes
of moderate Democrats in the House and a handful of Republicans in the
Senate meant softening some provisions in the bill." He mentions that
some of the "harsher measures" for the trading business were "blunted,"
while "in a blow to Obama, the consumer protection
agency would not regulate auto dealers, even though they assemble loans
for millions of car buyers."
- A Big Deal Alison Vekshin and Phil Mattingly
in their coverage for Businessweek introduce the deal as "the most
sweeping overhaul of U.S. financial regulation since the Great
Depression." They also quote Stuart Eizenstat, Clintonian deputy
Treasury secretary: "When one says this is the biggest change in our
financial regulation in 70 years, that's not an exaggeration."
- A Gift to Wall Street? "The most crucial element in the re-regulation of Wall Street has been
gutted," asserts Robert Lenzner at Forbes. "At least for now, there will be no limits on how much money
Wall Street can borrow to do its business."
- Doesn't Acknowledge Federal Role in Housing Bubble, writes 24/7 Wall St.'s Douglas McIntyre.
He call the bill "the end of banking as we know it." He notes that the Fed's role isn't acknowledged. "The disaster was as much the failure of federal regulators and the
Fed's drive a decade ago to get every man, woman, and child into his or
her own home. But, that did not matter much to the Administration, the
House or Senate." The bill, he says, "eviscerated big banks," while "as
usually happens in the federal government, private institutions fare
worse than public ones." The Fed is being left largely untouched, aside
from slight oversight increase in the form of an audit and "a tracking
of its balance sheet actions."
- Will Probably Pass "The bill is expected to have enough support to become law," writes Damian Paletta for The Wall Street Journal. "Both chambers plan to vote next week."
- No Recognition of Government Involvement in Crisis Mark Calabria
at National Review is fuming. "Nowhere in the final bill will you see
even a pretense of rolling back the endless federal incentives and
mandates to extend credit, particularly mortgages, to those who cannot
afford to pay their loans back. After all, the popular narrative
insists that Wall Street fat cats must be to blame for the
credit crisis." The bill will regulate the wrong folks, he explains.
Furthermore, "the legislation's worst oversight is to ignore completely
the role of loose monetary policy in driving the housing bubble. A bubble of such historic magnitude as the one we went through can only occur in an environment of extremely cheap and plentiful credit. The ultimate provider and price-setter of that credit was the Federal Reserve."
- And the Markets Laughed--Talk About 'Toothless' "Oh yeah, this new financial regulation bill is going to be HORRIBLE for capitalism," snorts Joe Weisenthal over at Business Insider. "That must be why futures began rallying within seconds of the financial
reform compromise. Seriously, the timing couldn't be more clear."
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