Federal regs set to restrain Wall Street risk
The legislation creates a new federal agency to police consumer lending, set up a warning system for financial risks, force failing firms to liquidate and map new rules for instruments that have been largely uncontrolled.
Leaving the White House for Toronto, Obama said the package will "help prevent another financial crisis like the one that we're still recovering from."
Bank stocks soared as investors appeared relieved that the rules were not as strict as they'd feared. Bank of America Corp. stock rose more than 2 percent, while Goldman Sachs Group Inc. and JPMorgan Chase & Co. each posted 3 percent gains.Again, not quite. This bill does very little at all to Wall Street. The real impact is to mom and pop Main Street. That's why the fat cat's got the market boost that they did.
The New Lords of Finance
Why Wall Street and Washington both like 'reform.'
The Democrats who wrote the bill are selling it as new discipline for Wall Street, but Wall Street knows better. The biggest banks support the bill, and the parts they don't like they will lobby furiously to change or water down.
Big Finance will more than hold its own with Big Government, as it always does, while politicians will have more power to exact even more campaign tribute. The losers are the overall economy, as financial costs rise, and taxpayers when the next bailout arrives.A perfect example of how the label does not fit the bill (pun intended)
Let's also not forget the Senate's rendering of a "resolution process" for failing financial giants. This provision is ostensibly the reason for this entire exercise—to end the notion of too-big-to-fail banks and create a process in which regulators feel comfortable allowing failure.
Yet the discretion handed to the FDIC as the resolution overseer allows a replay of the AIG debacle, in which the company was used as a conduit to pay counterparties 100 cents on the dollar. The FDIC will now be empowered to do the exact same thing, except that it will be allowed to discriminate even further—with the discretion to give some creditors a total bailout while imposing losses on others. Think United Auto Workers versus Chrysler bond holders.
The bill being passed only makes it easier for the Chicago Gang to line their pockets and the pockets of their allies.