Sweeping US financial reform passed by Senate
The US Senate has given final approval to the biggest overhaul of American financial regulation in decades.
The reforms are intended to avert a repeat of the 2008 crisis that brought the world economy to the brink of collapse.
The Senate vote is a major victory for President Barack Obama and comes after months of political wrangling.
Speaking afterwards, Mr Obama said the new regulation would give the strongest consumer protection in history.
He said the American people would never again be asked to foot the bill for Wall Street’s mistakes.
Senators approved the reform bill by 60 votes to 39. It was passed by the US House of Representatives earlier this month.
The reforms are designed to reduce the risks that banks take and to boost protection for consumers. They include new government powers to break up any company that becomes so big its failure could threaten the economy.
Mr Obama said it would bring an end to “shadowy deals”.
“Even before the financial crisis that led to this recession, I spoke on Wall Street about the need for common sense reforms to protect consumers and our economy as a whole,” he said.
“But the crisis came, and only underscored the need for the kind of reform that the Senate passed today. The kind of reform that will protect consumers when they take out a mortgage or sign up for a credit card, reform that will prevent the kind of shadowy deals that led to this crisis, reform that would never again put taxpayers on the hook for Wall Street’s mistakes.”
Moments after the vote, Federal Reserve chairman Ben Bernanke said: “The financial reform legislation approved by the Congress today represents a welcome and far-reaching step toward preventing a replay of the recent financial crisis.”
The legislation has been described by US Treasury Secretary Tim Geithner as “the most sweeping set of financial reforms since those that followed the Great Depression”.
The legislation creates a new federal agency designed to oversee consumer lending and outlines new regulations for complex financial instruments.
To this end, it will set up a powerful consumer financial protection bureau, with powers to clamp down on abusive practices by credit card companies and mortgage lenders.
Large banks will also be required to increase the amount of capital they hold in reserve against loans going bad.
However, they will only be forced to do so after five years, as the government is keen that banks do not hold back on lending money during the economic recovery.
The bill also introduces the so-called Volcker rule – named after the former Federal Reserve chairman Paul Volcker, who proposed it.
Banks will be banned from what is called proprietary trading – effectively taking bets on financial markets using its own money.
They will also be limited to investing a maximum of 3% of their capital in speculative businesses such as hedge funds or private equity funds.
From other news sites
FOXNews.com Congress Passes Sweeping Financial Overhaul
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Source: BBC news http://www.bbc.co.uk/news/business-10654128