U.S. Senate sends financial overhaul bill to Obama

The U.S. Senate approved a sweeping overhaul of the nation’s financial system and government oversight in reaction to the economic collapse of late 2008.

The bill passed the Senate chamber on a 60-39 vote. The House has already approved the same version of the bill, which now heads to President Barack Obama for signature.



Known formally as the Dodd-Frank Wall Street Reform and Consumer Protection Act, HR 4173 will become law one day after Obama signs it. The bill is intended to provide greater oversight of the U.S. financial system and to install new protections for American consumers.

The bill is active in stages, anywhere from three months to five years. Like health care, there will be a ton of agency regulations to be decided during the next 18 months.  According to one non-partisan analysis, there are 243 rules to be made and 67 studies to be completed to full enact the Dodd-Frank measure.

NEW REGULATORS
The new law will create a 10-member Financial Stability Oversight Council and an Office of Financial Research.  Both of those bodies will be able to request information from any financial company, which is defined as an entity which garners 85% of its revenue from financial activities.

Their information requests must be centered around the purpose of assessing threats to U.S. financial stability and it can include requests to foreign banks with U.S. assets.

The Federal Reserve will issue many of the rules for stress tests, credit exposure limits, and public disclosure that financial institutions will have to follow.

TOO BIG TO FAIL
Banks with $50 billion or more in assets will fall into the "too big to fail" category that requires stricter oversight, which for the time being should not affect any Arkansas-based banks. Under the new law, those "too big to fail" banks can be restricted from mergers or consolidation, stopped from offering certain financial products, ordered to terminate activities, or required to sell or transfer assets to satisfy regulators’ concerns.

CONSUMER PROTECTION

Several divisions of existing consumer protection agencies will be rolled into the new Consumer Financial Protection Bureau. This bureau will have broad rule-making authority over "non-depository covered persons" — ironically, a term that must be defined by the bureau and the Federal Trade Commission within one year.

The bureau is charged with coordinating with federal regulators and state bank supervisors in the oversight of large insured banks and thrifts. However, insurance companies appear to be exempt from the authority of the new bureau.

Within the first 9 months of the new law, the Federal Reserve is charged with assessing whether interchange fees from electronic debit transactions are "reasonable and proportional to the cost" of processing transactions. This is a subject that could have wide-ranging implications on fees that banks of all sizes collect; it could also greatly affect small businesses and all consumers.

Link here for more details — including info on derivatives trading and executive compensation — from Roby Brock’s report at TalkBusiness.net.