House approves drastic overhaul of financial sector

The US House of Representatives has approved a sweeping reform of the country's financial industry. Democratic House Speaker Nancy Pelosi (photo) described the package, which now goes to the Senate, as a hint to Wall Street that "the party is over".

AFP - The US House of Representatives on Friday approved the most sweeping regulatory overhaul of the financial sector since the Great Depression of the 1930s, a key goal of President Barack Obama.

Lawmakers voted 223-202 to pass the 1,300-page legislation, a package of measures Obama's Democratic allies crafted in response to the global financial meltdown of 2008, which has left the US economy still sputtering.

The US Senate was expected to take up the plan- which faces stiff opposition from the financial industry and its Republicans allies, not one of whom voted favor the plan -- in 2010.

Democratic House Speaker Nancy Pelosi has described the measure, a centerpiece of Obama's response to the 2008 global financial meltdown, as a clear warning to Wall Street that "the party is over."

"American families will no longer be at the mercy of Wall Street in terms of their jobs, their homes, their pension security, the education of their children," Pelosi said Thursday.

Lawmakers had faced votes on several amendments, defeating one that would have scrapped a central provision, the creation of a Consumer Financial Protection Agency (CFPA) to oversee mortgages and credit cards.

The bill, which may help Democrats harness simmering voter anger ahead of the 2010 mid-term elections, has drawn fierce opposition from the financial sector and its Republican allies as stifling innovation with weighty new rules.

The number two House Republican, Representative Eric Cantor, said the legislation "frightens people and creates uncertainty in the American economy, preventing job growth."

The bill notably tackles the issue of firms deemed "too big to fail," which received hundreds of billions of dollars in US government "bailout" cash because their collapse would have dealt crippling blows to the economy.

The legislation gives regulators the power to dismantle such giants, and lays out a systematic way to unwind them in case of collapse that ensures shareholders and unsecured creditors, not taxpayers, bear the losses.

It also reinforces the powers of the Securities and Exchange Commission to detect irregularities that could provide an early warning of fraudulent investment schemes, like the fraud perpetrated by Wall Street swindler Bernie Madoff.

The measure also includes a first-of-its-kind plan to regulate the vast market in arcane financial products called derivatives.

It would give the Federal Reserve broader powers to oversee large at-risk firms, but also give the Government Accountability Office -- the investigative arm of the US Congress -- more oversight power over the Fed itself.

Amid US public anger at lavish bonuses paid out at firms the government saved from collapse, the measure provides for shareholders to hold non-binding annual votes on executive compensation, including severance packages known as "golden parachutes."

The House and Senate must approve identical legislation in order to send it to Obama to sign into law.
 

Date created : 2009-12-11