Lawmakers delivered a win for the Obama administration when the reached an agreement on the historic Wall Street reform bill after a 21 hour-long session debate. The bill is meant to institute tighter restrictions, more oversight, and hedge profits of the financial industry.
As this article from Reuters.com explains, the legislation represents the most sweeping financial rules revamp since the 1930s. The bill is expected to get final congressional approval next week although the new rules will not be implanted for months.
The legislation would set up a new financial consumer watchdog, create a protocol for dismantling troubled financial firms and mandate higher bank capital standards, all in an effort to avoid a repeat of the 2007-2009 credit crisis that hammered the economy and triggered taxpayer bailouts of floundering firms.
To secure agreement, lawmakers reached deals in the final hours on the most controversial sections, which restrict derivatives dealing by banks and curb their proprietary trading to shield taxpayer-backed deposits from more risky activities.
Banks will be allowed to keep most swaps dealing activity in-house, although the riskiest trading would be pushed out into an affiliate. They will also be permitted small investments in hedge funds and private equity funds.
The concessions could lessen the impact on bank profits.
The KBW bank stock index, which registered its worst performance since October last month, was 1.6 percent higher in late-morning trade, with both Goldman Sachs Group Inc and Morgan Stanley, two of the banks that will be most affected, showing gains.