Senate passes financial industry overhaul

In a major victory for President Barack Obama, the US Senate has passed the most sweeping overhaul of financial industry rules since the Great Depression of the 1930s.

By a 59-39 margin, lawmakers approved Thursday an ambitious effort to curb Wall Street excesses blamed for fueling the 2008 global economic meltdown, amid smoldering voter anger months before November mid-term elections.

“To Wall Street, it says: No longer can you recklessly gamble away other people’s money,” Democratic Senate Majority Leader Harry Reid. “It says to those who game the system: The game is over.”

Senate Banking Committee chair Chris Dodd, a key author of the legislation, said it was “a major step toward creating a sound economic foundation for the American people we represent. This is their victory.”

The legislation, Obama’s top domestic goal, must still be merged with the House of Representatives’ rival version into a compromise measure before the final package can go to the president to sign into law.

House Financial Services Committee chair Barney Frank, a Democrat, told CNBC television that he foresaw smooth sailing and that “the president, I am certain now, will have signed this bill well before the Fourth of July.”

The measure aims to rein in big firms’ use of high-risk practices blamed for the collapse of 2008, end taxpayer-funded bailout of financial titans previously deemed “too big to fail,” and create an unprecedented consumer protection agency to shield Americans from industry abuses.

It also seeks to curb big banks’ lucrative, largely unregulated business in complex securities called derivatives, essentially bets on the future cost of an asset, which many businesses use to control risk from volatile prices.

It includes several measures aimed at increasing the transparency at the US Federal Reserve and the central bank’s accountability, as well as a measure aimed at blocking International Monetary Fund aid packages like the one for Greece without a guarantee that the money will be repaid.

A few hours before the vote, Obama pledged that the law would not smother the market.

“The reform I sign will not stifle the power of the free market — it will simply bring predictable, responsible, sensible rules into the marketplace,” he said in the Rose Garden of the White House.

“Our goal is not to punish the banks, but to protect the larger economy and the American people from the kind of upheavals that we’ve seen in the past few years,” said the president.

Obama also took aim at the financial industry, accusing it of deploying “hordes of lobbyists and millions of dollars in ads” to kill the bill and trying to “water it down.”

“Today, I think it’s fair to say that these efforts have failed,” he said.

Four Republicans joined all but two Democrats to approve the measure, drawing praise from Reid at the end of a month-long, sometimes bitter debate expected to stretch into the House-Senate “conference” to build a compromise.

US Treasury Secretary Tim Geithner said in a statement that he looked forward to working with lawmakers “to produce a sensible, prudent reform bill that strengthens the American financial system and preserves our ability to innovate and compete in a global economy.”

The two chambers were to pick negotiating delegates on Monday.

Some of the remaining disputes include curbs on derivative trading and restrictions on investment activities by deposit-holding banks.

Senate Agriculture Committee chair Blanche Lincoln, a Democrat, authored a measure in the bill aimed at ending the largely unregulated derivatives business, a step forcefully opposed by big banks and their lobbyists trying to shape the legislation.

Dodd introduced and then pulled back from but did not withdraw a measure gutting Lincoln’s proposal.

Democratic Senators Jeff Merkley and Carl Levin, authors of a measure to enact the so-called “Volcker rule” curbing deposit-holding banks’ investment activities, expressed faint hopes the final bill would include it.

The measure, named for former US Federal Reserve chairman Paul Volcker, would stop banks from holding customers’ deposits at the same time as making investments for their own gain — so-called proprietary trading.

Curbs on “prop trading” went into effect after the Great Depression. In 1933, the Glass-Steagall Act prohibited commercial banks from underwriting corporate securities, or acting as brokerages, but it was undone in 1999.

Copyright © 2010 Agence France Presse

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6 Responses to "Senate passes financial industry overhaul"

  1. AustinRanter (AKA Gregg)  May 21, 2010 at 9:55 am

    This legislation is another political prank pulled on the American people. Its worthless.

    The most important changes needed to prevent banks and wall street from legally gambling their customers’ money away…wasn’t a part of this do-nothing, stick-it-in-the-publics-ass, political payback to financial and market institutions piece of ….

    Sorry, can’t help myself. This legislation is probably the worst done to the public since 1999.

    This financial overhaul is another victory for the banking/market institutions.

    Unless The Glass – Steagall Act is reinstituted, and the Commundities and Futures Modernization Act, and the Communities Reinvestment Act are substantially revised…this bill is worthless to American citizens…and actually, global citizens.

    What a sad, sad, sad day for America…and all of our global neighbors.

  2. griff  May 21, 2010 at 11:02 am

    More legal plunder authorized by Wall Street’s bestest buddies – the United States Congress.

  3. Mightymo  May 21, 2010 at 12:06 pm

    Three for Three, against. I agree this is a farce and the 600 million spent by financial institutions to fight implementation shows how unlikely we were to ever receive a worthwhile product.

    Like the battle against Public Healthcare, thanks to the millions spent to fight change, we ended up with pretty much a worthless document.

    I think it’s important to take note though that in both cases, it was our friends the Republiscum that fought worthy change all the way.

  4. Mightymo  May 21, 2010 at 12:11 pm

    Oh, I should say I agree with Austin. Glass-Steagall served us well (the banks fought to change it for almost 30 years!) for 60 years. Financial disaster struck only 10 years after its demise. The logical solution would have been to reimplement what worked so perfectly for so long.

  5. Carl Nemo  May 22, 2010 at 11:34 pm

    Evidently too this bill allows the government to “seize” companies that are deemed to be in financial trouble, but what’s the criteria for doing so? The decision is evidently to be exercised by a ‘political appointee’ ; i.e., ‘hack/czar’which will surely allow for corruption of the process.

    If the likes of Goldman Sachs or a heavy hitter of similar strength wants to take out another Lehman Bros, Bear Stearns, or Merrill Lynch & Co. which were all destroyed by engineered short selling shenanigans on the part of Goldman Sachs and Morgan Stanley then why not? Now both Goldman Sachs and Morgan Stanley are under investigation for both civil and possible criminal involvement in the destruction of the aforementioned companies along with the life savings and investments of their shareholders. So when the big boys of the future need the competition “wacked” then they’ll just lean on their bought and paid for running dogs in the administration to possibly seize the competition. Why not, it’s now legally enfranchised thanks to our terminally corrupt leadership in Congress.

    http://www.newsmax.com/Morris/finance-bill-barack-obama/2010/05/21/id/359786

    It’s the same old corrupt players involved too with watering down this legislation and insuring the “dark side” of banking and brokerage are covered and protected; particularly Senator Chris Dodd, Dem-CT. Hopefully the good citizens of Connecticut have had a bellyful of the Chris Dodd’s and the Joe Lieberman types in the Senate. Unfortunately for them their state AG, Richard Blumenthal who’s evidently a liar concerning his military record; i.e, having not served his nation during the Nam era is also the possible replacement for Chris Dodd. / : |

    When are these “Connecticut Yankees” going to wake up and say enough is enough at the ballot box?! If we went back a 150 plus years or so, they’d be shouting at the top of their lungs, “get the tar, the ropes, the feathers and many sharp edged rails” to take care of these political vermin.

    What’s tragic about Chris Dodd is this is the end of his tenure in the Senate. You’d think the man would love his country and the people more than money; but no, this shifty-eyed slime ball sold us all out for just a few dollars more. He could have thrown us a bone; but instead, prostrated himself before his shadowy corporate controllers to the bitter end. : |

    Carl Nemo **==

  6. Almandine  May 25, 2010 at 9:28 pm

    Business is one thing, but another, more important issue buried in that bill:

    http://www.cnsnews.com/news/article/66439

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