EconomicsUSA: Financial Regulation: New draft law passes Senate

MarketWatch reports (May21,2k10):

"Senate OKs sweeping restrMaictions on big banks by Ronald D. Orol

WASHINGTON - Senate lawmakers on Friday approved the most significant increase in the regulation of U.S. banks since the Great Depression, placing new restrictions on the nation's biggest banks, reining in the Federal Reserve and crafting a major new consumer protection division for mortgage and credit-card products. The mammoth legislative package -- which passed 59 to 39 -- requires "too-big-to-fail" banks to install new capital restrictions and divest their derivatives units, sets up a government board to assign credit raters for banks' structured finance securities and instructs the government to conduct a one-time unprecedented audit of the Federal Reserve's emergency response programs

134 comments accompany the brief item just recently published.

The source here doesn't mention how the new law doesn't cover the financial malfeasance of Fannie Mae and Freddie Mac, the housing overlords which enriched its bosses so grandly even tho these two corporations are quasi-govt operations, pushed bad business loands and mortgages on woud-be homeowners without a dream of paying their monthly charges, setting the scene for the later foreclosures that put people out on the street all over America. Bad loans / mortgages and insolvancies backed up by the Fed govt, at taxpayers expense, were the origin of the scams that the banks bawt-into and were the main / key cause of the financial crisis from which the Bush-Paulsen and Obama-Geithner excheqeries sawt to save us thru the TARP bailouts. This skyrocketed the national USA debt from which the chickens are coming home to roost.

A very positive provision of the new legislation is the enforced splitting off of derivatives money-games from banking proper. This move is in keeping with the Kuyperian-Dooyeweerdian principle of sphere sovereignty in the subsectoring of finance enterprise-types and the regulation of different institutions / enterprises in the industrial sector of banking and finance, differently.

Sen. Blanche Lincoln (D-Ark.), chairman of the Senate agriculture committee, proposed dramatic restrictions on trading in derivatives, including a provision that could force big banks to spin off the lucrative business altogether. Her language was added to Dodd's bill and endured, despite efforts by the administration, lobbyists and Dodd himself to temper it.

Hooray! for Blanch! This puts the kiebosh on claims that she is simply an Establishment Democrat. Rather, she is an American treasure for standing up to the Establshment Obamonomix that flaw the new Senate-proposed law (it has to be reconciled with the House version, and then sent up to the White House for the imperial signature.

Two other flaws occur in the Senate's version (and probably are already present in that of the House, as well). First, the bureaucracy was "grown" (groan!) by bloating a present function that has not been properly been addressed by the presently (already) mandated agency, which has indeed broken the law in this failure. -- Regarding consumer protection! Now the overhead expenses of setting up a new agency and the provision of new hires to staff, the costs of this boondoggel will have to be borne by USA taxpayers, sometime down the road short of a grand collapse, but in the meantime of course the Obamanoiods in the Senate and House will just tack the costs onto the Federal deficit. Not preventing a collapse but delaying it.

In the House version, Barney Frank speculates on what will go on in the conference -- not truly a "reconciliation" (which can only reconcile different amounts of money to be allocated) by a joint committee of delegates of the two chambers, msndated to reach compromises to bring forward a single draft text to be voted up by both the Senate and House.

Frank said he expects to abandon a House provision that would require the financial industry to pay into a fund that could be used to liquidate failing firms, an issue that became a political lightning rod in the Senate. And he said he expects the Senate to back off its proposal to house an independent consumer protection agency within the Federal Reserve.

Until, we shall have to wait for much dust to settle.
-- EconoMix