Complex Financing

As a sequel to the health care reform bill which passed last month, the Obama is pushing the financial reform bill. Wall Street has all of its lobbyists out in force trying to kill the bill. They’re wasting the lobbyists’ times and throwing away their money. This law is going to pass.

So what’s in this bill? I have to admit I didn’t really know myself until I did the research to write this post. Here are the main provisions of the bill:

• Create a new council of regulators charged with monitoring systemic risks to the economy.
• Create a consumer financial protection agency within the Federal Reserve.
• Create new rules designed to create transparency for derivatives. Translation: how the derivatives were created and what’s in this financial product must be disclosed.
• The Federal Reserve would regulate the nation’s largest financial companies.
• The Office of the Comptroller of the Currency (an existing federal organization) would regulate national banks.
• Federal Deposit Insurance Corp. would jointly regulate state-chartered banks with state regulators. The Office of Thrift Supervision would be eliminated.
• Empower the federal government to seize and break up companies whose failure might pose a systemic risk to the economy.
• Gives the Federal Trade Commission new powers to impose rules on industry, the powers would mostly consist of eliminating restrictions that slow the agency’s rule-making process.
• Would require companies that package loans into marketable securities to hold onto at least 5% of the credit risk.
• Would create a whistle blower program within Securities and Exchange Commission (SEC), with rewards of up to 30% of funds recovered.
• Would shift the SEC to self-funding, freeing it from the annual congressional appropriations process.
• Create a new Office of National Insurance within Treasury to monitor the insurance industry, recommending to the systemic-risk council insurers that should be treated as systemically important, as well as coordinate international insurance issues.
• Establish a new office of Credit Rating Agencies at the SEC, with its own compliance staff and power to fine the agencies.
• Would beef up enforcement powers and requires SEC to examine nationally recognized statistical ratings organizations at least once a year.
• Would increase internal controls at agencies, require more transparency in ratings procedures and methodologies, and empower investors to bring private rights of action.
• Would require municipal financial advisers, swap advisers and investment brokers to register with the SEC. It would also subject them to rules issued by the Municipal Securities Rulemaking Board.
• Hedge funds that manage more than $100 million would have to register with the SEC as investment advisers and to disclose certain information about their trades and portfolios to help regulators assess systemic risk.

Got all that? Love it or hate, as I said at the beginning of this post, you’ll see most of these things become law. The exact bill is still being haggled, as the House and Senate need to agree on all of the provisions.

What’s your take on this bill? Do you think it’s going to help or hurt the economy?

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