{"id":297,"date":"2010-05-21T02:34:54","date_gmt":"2010-05-21T07:34:54","guid":{"rendered":"http:\/\/blogs.law.harvard.edu\/abrahamtiamiyu\/?p=297"},"modified":"2010-06-22T10:46:12","modified_gmt":"2010-06-22T15:46:12","slug":"financial-reform-legislation","status":"publish","type":"post","link":"https:\/\/archive.blogs.harvard.edu\/abrahamtiamiyu\/archives\/297","title":{"rendered":"Financial reform legislation"},"content":{"rendered":"<p>On May 20, 2010, the United States Senate passed the most important regulatory reform of the financial system since the Banking Act of 1933. Here are some of the critical components of the legislation:<\/p>\n<ul>\n<li><a title=\"Restoring American Financial Stability Act of 2010\u2019\u2019.\" href=\"http:\/\/banking.senate.gov\/public\/_files\/ChairmansMark31510AYO10306_xmlFinancialReformLegislationBill.pdf\" target=\"_blank\">The bill<\/a> explicitly prohibits future <strong>government bailouts<\/strong> of financial      institutions and it requires that the financial industry be      responsible for the cost of unwinding failing banks<\/li>\n<li><strong>Resolution Authority<\/strong>: According to Bloomberg, \u201cthe Senate bill would give the Federal Deposit Insurance Corp., which already has authority to liquidate failed commercial banks, power to unwind large failing financial firms whose collapse would roil the economy.\u201d<\/li>\n<li>Creation of a <strong>Consumer      Financial Protection Agency<\/strong><strong><em> <\/em><\/strong>at the Federal Reserve to protect      consumers from abusive credit-card and mortgage lenders<\/li>\n<li>Establishment of a <strong>Financial Stability Oversight Council<\/strong> to monitor major financial      institutions so that the failure of one large bank does not pose a systemic      risk to the entire financial system<\/li>\n<li>U.S. banks are now banned from engaging in      proprietary trading as well as from owning      hedge funds and private-equity funds (The \u201c<strong>Volcker      rule<\/strong>,\u201d named after the former Fed Chairman Paul Volcker)<\/li>\n<li>Greater transparency in the $615 trillion      <strong>derivatives<\/strong> market as most      trades will now have to be conducted on regulated exchanges, where trades      are made public, instead of the current over-the-counter system (In addition, banks with access to the Federal Reserve discount window\u00a0would be required to spin off \u00a0their swaps trading operations)<\/li>\n<li>Creation of a <strong>credit ratings <\/strong><strong>board<\/strong><strong> <\/strong>that would randomly assign ratings agencies      for securities to reduce conflict of interest (Currently, banks are      responsible for choosing and paying the agencies that rate their securities)<\/li>\n<li><strong>Hedge funds<\/strong><strong> <\/strong>with $100 million or more in assets would be required      to register with the Securities and Exchange Commission and those deemed too      risky will be supervised by the Federal Reserve<\/li>\n<\/ul>\n<p><em>Note that the Senate bill needs to be reconciled in conference with the version passed by the House last December. <\/em><\/p>\n<p>Sources: <a title=\"Finance-Overhaul Bill Would Reshape Wall Street, Washington\" href=\"http:\/\/www.bloomberg.com\/apps\/news?pid=newsarchive&amp;sid=aBNqu6jjyNqc\" target=\"_blank\">Bloomberg<\/a>, <a title=\"Senate passes sweeping Wall Street reform\" href=\"http:\/\/money.cnn.com\/2010\/05\/20\/news\/economy\/Wall_Street_reform\/index.htm\" target=\"_blank\">CNN<\/a><\/p>\n<p><span style=\"color: #000000\">Abraham Tiamiyu<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>On May 20, 2010, the United States Senate passed the most important regulatory reform of the financial system since the Banking Act of 1933. Here are some of the critical components of the legislation: The bill explicitly prohibits future government bailouts of financial institutions and it requires that the financial industry be responsible for the [&hellip;]<\/p>\n","protected":false},"author":2328,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[127],"tags":[],"class_list":["post-297","post","type-post","status-publish","format-standard","hentry","category-general","post-preview"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/archive.blogs.harvard.edu\/abrahamtiamiyu\/wp-json\/wp\/v2\/posts\/297","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/archive.blogs.harvard.edu\/abrahamtiamiyu\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/archive.blogs.harvard.edu\/abrahamtiamiyu\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/abrahamtiamiyu\/wp-json\/wp\/v2\/users\/2328"}],"replies":[{"embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/abrahamtiamiyu\/wp-json\/wp\/v2\/comments?post=297"}],"version-history":[{"count":20,"href":"https:\/\/archive.blogs.harvard.edu\/abrahamtiamiyu\/wp-json\/wp\/v2\/posts\/297\/revisions"}],"predecessor-version":[{"id":324,"href":"https:\/\/archive.blogs.harvard.edu\/abrahamtiamiyu\/wp-json\/wp\/v2\/posts\/297\/revisions\/324"}],"wp:attachment":[{"href":"https:\/\/archive.blogs.harvard.edu\/abrahamtiamiyu\/wp-json\/wp\/v2\/media?parent=297"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/abrahamtiamiyu\/wp-json\/wp\/v2\/categories?post=297"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/abrahamtiamiyu\/wp-json\/wp\/v2\/tags?post=297"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}