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Posted on Fri, Jun. 25, 2010
Big banks escape toughest limits in new regulation bill
Kevin G. Hall and David Lightman | McClatchy Newspapers
last updated: June 25, 2010 09:25:51 PM
WASHINGTON — Like a hard-fought draw in a World Cup soccer match, consumers won sweeping new protections under a revamp of financial regulation that lawmakers agreed to Friday but large banks dodged the biggest hits that had been coming their way.
The sweeping regulatory revamp affects everything from credit cards and mortgages to the structure of large global banks and who regulates the financial sector and how.
Lawmakers, narrowing the differences between legislation from the House of Representatives and the Senate, agreed to establish a Bureau of Consumer Financial Protection to address the shoddy lending and ineffective regulation that helped bring about the nation's financial crisis.
Congressional negotiators also rejected attempts to weaken the new bureau, retaining an independent source of funding and an independent director rather than a board of directors.
When the full House and Senate take up the entire bill next week, however, they'll vote on a package that won't hit big banks nearly as hard as Congress first contemplated.
Banks won't have to prepay billions of dollars into a fund to cover the cost of breaking up large failing financial institutions, as both the House and Senate first proposed. Banks also escaped a limitation on their size, and there's no explicit prohibition of government rescues if their failures pose major risks to the economy.
In addition, they'll have to wall off their trading in the lucrative, complex instruments called derivatives in separate related companies. The lack of transparency surrounding derivatives amplified the financial crisis.
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