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petegz28
06-25-2010, 08:40 AM
Key House and Senate lawmakers agreed on far-reaching new financial rules early Friday after weeks of division, delay and frantic last-minute deal making. The dawn compromise set up a potential vote in both houses of Congress next week that could send the landmark legislation to President Obama by July 4.

Lawmakers pulled an all-nighter, wrapping up their work at 5:39 a.m. -- more than 20 messy, mind-numbing, exhaustive hours after they began Thursday morning.

"It's a great moment. I'm proud to have been here," said a teary-eyed Sen. Christopher J. Dodd (D-Conn.), who as chairman of the Senate Banking Committee led the effort in the Senate. "No one will know until this is actually in place how it works. But we believe we've done something that has been needed for a long time. It took a crisis to bring us to the point where we could actually get this job done."

Both the House and Senate must approve the compromise legislation before it can go to Obama for his signature.

Despite myriad changes in recent days, Democrats appear poised to deliver a final bill that largely reflects the administration's original blueprint unveiled almost precisely a year ago. While it would not fundamentally alter the shape of Wall Street or break up the nation's largest firms, the legislation would establish broad new oversight of the financial system.

A new consumer protection bureau housed in the Federal Reserve would have independent funding, an independent leader and near-total autonomy to write and enforce rules. The government would have broad new powers to seize and wind down large, failing financial firms and to oversee the $600-trillion derivatives market. In addition, a council of regulators, headed by the Treasury secretary, would monitor the financial landscape for potential systemic risks.

"The finish line is in sight. The bill that has emerged from conference is strong," Treasury Secretary Timothy F. Geithner said in a statement early Friday. "It will offer families the protections they deserve, help safeguard their financial security and give the businesses of American access to the credit they need to expand and innovate."

On the House side, the final tally was 20 to 11 to approve the conference committee's report. On the Senate side, it was 7 to 5. The votes fell along party lines, earning no support from Republicans on the two panels.

"This legislation is a failure on both counts," Sen. Judd Gregg (R-NH) said in a statement that denounced the compromise as failing to address "shoddy underwriting practices" or problems with the government-sponsored entities Fannie Mae and Freddie Mac. "It will not encourage much-needed stability and confidence in our financial markets. It will not significantly reduce systemic risk in our financial sector."

The final and most arduous compromise began to fall into place just after midnight. Sen. Blanche Lincoln (D-Ark.) agreed to scale back a controversial provision that would have forced the nation's biggest banks to spin off their lucrative derivatives-dealing businesses.

Thursday evening, members of the House-Senate conference committee also reached accord on the "Volcker rule," named after former Federal Reserve chairman Paul Volcker. That measure would bar banks from trading with their own money, a practice known as proprietary trading.

Lincoln's provision had for months remained a particularly thorny issue for Democrats, causing internal divisions that threatened to derail the massive legislation.

While consumer advocates and many liberals supported her provision, it encountered stiff opposition from the Obama administration and some regulators, as well as from an influential bloc of moderate Democrats and House Democrats from New York, where much of the financial derivatives industry is concentrated.

Administration officials and Democratic leaders worked fervently Thursday to bridge the divide between Lincoln and those House Democrats. Top Treasury officials, including Deputy Secretary Neal Wolin and Michael Barr, an assistant secretary, roamed the Dirksen office building alongside White House economic adviser Diana Farrell, conferring with aides and key lawmakers. Gary Gensler, chairman of the Commodity Futures Trading Commission, worked the committee room throughout the day.

Lincoln came and went from the hearing room Thursday, meeting with members of the centrist New Democrat Coalition to try to find common ground and huddling with Dodd (D-Conn.); Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee; and other lawmakers.

In the very early morning hours Friday, Rep. Collin Peterson (D-Minn.) -- chairman of the House Agriculture Committee and a Lincoln supporter -- introduced a proposal that would compel banks to spin off only their riskiest derivatives trades, including particular forms of credit-default swaps, which are complex financial bets that exacerbated the financial crisis.

At the same time, the proposal would allow banks to hold onto certain derivatives trading related to interest rates, currency rates, gold and silver. They also would be allowed to continue trading in derivatives in order to hedge against their own risks.

Under the compromise, the derivatives operations that firms spin out of their federally-insured banks could still be retained in a separately-capitalized affiliate. In addition, firms would have two years to institute the new rules.

The Senate agreed to the compromise language just after 2:30 a.m.

The cavernous Dirksen 106 conference room remained packed at that hour, but it was a chaotic and cluttered mass of humanity. Lawmakers had stopped trying to conceal their yawns. Aides who had worn down their BlackBerry batteries recharged them for the home stretch. Trash cans spilled over with coffee cups and sandwich wrappers. Empty Fritos bags and plastic Diet Coke bottles littered the room, along with reams of paper -- old amendments, new amendments, handwritten amendments, amendments to amendments.

"So much for the paperless society," Frank quipped at one point.

In reaching a deal on the Volcker rule, negotiators adopted a provision that mirrors language previously offered by Sens. Carl M. Levin (D-Mich.) and Jeff Merkley (D-Ore.), which would ban certain forms of proprietary trading and forbid firms from betting against securities they sell to clients. The Merkley-Levin measure never got a vote on the Senate floor.

"One goal of these limits is to reduce participation in high-risk activity that can cause significant losses at institutions which are central to the financial system," Dodd said. "A second goal is to end the use of low-cost funds, to which insured depositories have access, from subsidizing high-risk activity."

Under the agreement, firms would have up to two years to scale back their proprietary trading and investments in hedge funds and private equity funds. Banks also would be barred from betting against their clients on certain investments deals.

Even as they worked to toughen the Volcker language, lawmakers agreed to an exemption at the behest of Sen. Scott Brown (R-Mass), one of only four Republicans to vote for an earlier version of the financial regulation bill in the Senate last month.

Brown, whose state is a hub of the asset-management industry, wanted the bill to allow banks to invest at least a small amount of capital in hedge funds and private equity investments. The measure would prohibit a banks from investing more than 3 percent of their capital in private equity or hedge funds. It was one of a number of provisions tailored to hold onto key votes as the bill heads toward final passage.

Lawmakers squared away a handful of other lingering issues late Thursday and early Friday.

They agreed to exempt the nation's 18,000 auto dealers from oversight by a new consumer financial protection watchdog, a striking legislative victory for one of the nation's most influential lobbying groups and a blow to consumer advocates and Democratic leaders who had long opposed such a loophole. "It is time for people like myself to concede that the votes are not there to give the consumer regulator any role in this," Frank said.

Lawmakers also voted to give shareholders more of a say on corporate governance, to place new restrictions on mortgage lending and to levy a risk-based assessment on large financial firms to help pay for the wide-ranging bill, which the Congressional Budget Office has estimated would cost nearly $20 billion over the next decade.

Weary lawmakers wrapped up their work just after sunrise, only hours before Obama was scheduled to head to Toronto for a meeting of global finance ministers and central bankers. Both Dodd and Frank said they hoped the passage of the legislation by their committees will help the United States lead the ongoing global effort to harmonize new financial safeguards.

"We've put in the hands of the president a very powerful set of tools for him to reassert American leadership in the world," Frank said.

One of the last motions Friday was to name the bill after the two chairmen, who had shepherded the legislation through the House and the Senate over the past year. At 5:07 a.m., they agreed unanimously that it would be known as the Dodd-Frank bill, and the sound of applause echoed down the empty hallways.

http://www.washingtonpost.com/wp-dyn/content/article/2010/06/25/AR2010062500675_pf.html

petegz28
06-25-2010, 08:42 AM
"No one will know until this is actually in place how it works. But we believe we've done something that has been needed for a long time. It took a crisis to bring us to the point where we could actually get this job done."

I mean seriously, come the **** on! What do you mean you won't know how it works?

Could you imagine this sort of attitude towards say a car maker who built a car and then said, "well, we won't know exactly how the car works until after we sell it to you" ???

dirk digler
06-25-2010, 08:52 AM
Here is another example for mlyonsd on how weak and beholden to corporations the Dems are. Didn't do anything to fix the too big to fail option and watered down the Volker rule.

As far as Dodd's comments go I think that applies to 95% of bills passed by Congress.

petegz28
06-25-2010, 08:55 AM
Here is another example for mlyonsd on how weak and beholden to corporations the Dems are. Didn't do anything to fix the too big to fail option and watered down the Volker rule.

As far as Dodd's comments go I think that applies to 95% of bills passed by Congress.

Which is probably why their programs never seem to really work they way they are supposed too or cost more than they were supposed too. Just a guess.

banyon
06-25-2010, 09:41 AM
I don't see anything wrong with that comment.

The legislation is watered down and useless, but no one has a magic 8 ball to tell them what actual impacts you will make on the financial system. That's why the banks employ legions of accountants and lawyers to try to get around these rules. They may (and probably won't be) effective in curbing the abuses.

mlyonsd
06-25-2010, 10:05 AM
Here is another example for mlyonsd on how weak and beholden to corporations the Dems are. Didn't do anything to fix the too big to fail option and watered down the Volker rule.

As far as Dodd's comments go I think that applies to 95% of bills passed by Congress.

I think you're misusing the word "weak" there. I'd replace it with 'corrupt' if I were you.

Otter
06-25-2010, 10:06 AM
I had plans to move an IBM ISeries from one data center to the other tonight and walked into an email this morning stating that one of the big wigs here is uncomfortable with my contingency plans if any problems were to arise.

A months worth of planning and my weekend is shot but these assholes can pass legislation reform effecting every American's health care and financial lives with "we'll know after it's in place" as an answer to "what if" and they wonder why we think they're out of touch dimwits that think they don't have to play by the same rules we do.

"Do as I say, not as I do"

Good Lord please stop this tumor we call government from growing any bigger.

Taco John
06-25-2010, 10:15 AM
Sounds like progressive legislation.

talastan
06-25-2010, 10:49 AM
As far as Dodd's comments go I think that applies to 95% of bills passed by Congress.

And this will increase my faith in the effectiveness of government how? :spock: This is a perfect example of how the government continues to screw up everything in the private sector that they put their corrupt hands on.

fan4ever
06-25-2010, 10:54 AM
I don't know why anyone would have any confidence in these assh*les having the gray matter to fix a damn thing...what a joke Washington has become...on both sides.

banyon
06-25-2010, 12:35 PM
Sounds like progressive legislation.

Can you name some prominent progressives who were supportive of it? I can't.

HC_Chief
06-25-2010, 12:46 PM
I mean seriously, come the **** on! What do you mean you won't know how it works?

Could you imagine this sort of attitude towards say a car maker who built a car and then said, "well, we won't know exactly how the car works until after we sell it to you" ???

That's not the scary line in the article, THIS one is:

"government would have broad new powers to seize and wind down large, failing financial firms and to oversee the $600-trillion derivatives market."

|Zach|
06-25-2010, 12:54 PM
I mean seriously, come the **** on! What do you mean you won't know how it works?

Could you imagine this sort of attitude towards say a car maker who built a car and then said, "well, we won't know exactly how the car works until after we sell it to you" ???

Are you comparing knowing how a newly built car will run to knowing how our economy will shake out?

dirk digler
06-25-2010, 01:03 PM
I think you're misusing the word "weak" there. I'd replace it with 'corrupt' if I were you.

I wouldn't replace it just add it. Dems are weak, beholden to corporations and corrupt. Works for me.

HC_Chief
06-25-2010, 01:07 PM
I wouldn't replace it just add it. Politicians are weak, beholden to corporations and corrupt. Works for me.

FYP

dirk digler
06-25-2010, 01:17 PM
FYP

That works for me as well :thumb:

petegz28
06-25-2010, 02:22 PM
Are you comparing knowing how a newly built car will run to knowing how our economy will shake out?

No, because it's really impossible to know either one for the most part. But to claim you really don't know how things will work until after the fact is pretty idiotic and would not fly for 99% of us in the private sector.

If you don't know, you don't do it. It's that simple. Hey, I am supportive of several aspects of this bill. But if I were to ever, in any of my jobs, go to my boss and say "let's do this" and then followed it up with "I really won't know how it will workout until we do it", I would have been told no until I had a pretty damn good idea of what would happen. And I had best had a plan to back stuff out should things go unexpectedly.

orange
06-25-2010, 02:25 PM
No, because it's really impossible to know either one for the most part. But to claim you really don't know how things will work until after the fact is pretty idiotic and would not fly for 99% of us in the private sector.

If you don't know, you don't do it. It's that simple. Hey, I am supportive of several aspects of this bill. But if I were to ever, in any of my jobs, go to my boss and say "let's do this" and then followed it up with "I really won't know how it will workout until we do it", I would have been told no until I had a pretty damn good idea of what would happen. And I had best had a plan to back stuff out should things go unexpectedly.

Since they don't know how to fix deep-water oil leaks, should they stop drilling deep-water wells?

dirk digler
06-25-2010, 02:27 PM
Since they don't know how to fix deep-water oil leaks, should they stop drilling deep-water wells?

:hmmm:

KC native
06-25-2010, 02:33 PM
Ritholz gives it a fair grade and seeing as how I haven't read or looked at what's in the bill yet I will defer to him. Also, before the idiots chime in, Ritholz was a lawyer before he was a money manager. Also, bolding and underlining is his.

http://www.ritholtz.com/blog/2010/06/grading-financial-regulatory-reform/
Grading Financial Regulatory Reform
Email this post Print this post
By Barry Ritholtz - June 25th, 2010, 12:16PM

This morning, we learned of a huge compromise in regulatory reform. The expectation was that no one was happy with the bill, but the politicians, who all get to go home to the voters and say “Well, at least we passed something.”

Overall, I give this a C minus: There are simply too many Fs to give them a much higher grade. Let’s look at what was passed and grade each section of reform:

TOO BIG TO FAIL: Grade: F

The new regulation does not directly address either the repeal of Glass Steagall or TBTF. The crisis legacy is a financial services sector that is highly concentrated with dramatically reduced competition. The six largest financial firms — combined assets: $9.4 trillion — will still dominate the industry. Too-Big-to-Fail remains the law of the land.

MORTGAGE UNDERWRITING STANDARDS: Grade A

Establishes new minimum underwriting standards for mortgages. No more no doc, NINJA, or Liar loans. Lenders must verify income, credit history and job status. Would ban payments to brokers for steering borrowers to high-priced loans. Of all the regulatory changes passed today, this seems to be the only one that, if in place a decade ago, would have prevented (or at least dramatically reduced) the crisis.

NEW REGULATORY AUTHORITY: Grade: C+

Gives federal regulators new authority to seize and break up large troubled financial firms without taxpayer bailouts; creates a sector rescue fund from banks with > $50B in assets. The time to assess this fee is before a crisis, not after — when banks need every penny of capital.

LEVERAGE: Grade: F

Inexplicably, all of the new regulations fail to reduce leverage rules today .

FINANCIAL STABILITY COUNCIL: Grade: B-

10-member Financial Stability Oversight Council to address system-wide risks to stability, with the power to break up financial firms. Oh, and about that leverage thingie? Directs them to look into it.

Question: Why not address leverage NOW, instead of kicking it down the road? Is Congress really THAT cowardly?

CREDIT RATING AGENCIES: Grade: F

Sets up a quasi-government entity to address conflicts of interest. Allow investors to sue credit-rating agencies. Establishes new SEC oversight office. Retains Oligopoly; Fails to open ratings to more competition. Considering that the ratings agencies were the prime enablers of the crisis, this failure is shameful.

DERIVATIVES: Grade B+

Moves most derivatives to exchanges, routed through clearinghouses,e etc. Customized swaps remain OTC, but have reporting requirements. New capital, margin, reporting, record-keeping and business conduct rules for firms that deal in derivatives. Failed to overturn CFMA.

VOLCKER RULE: Grade A-

Curbs propriety trading by FDIC insured depository institution. Would not have rpevented this crisis, but addresses the moral hazard of banks in the future due to the bailout.

CORPORATE PAY: Grade F

Give shareholders a non-binding vote on executive pay. No clawback provisions. Does not address imposing liability on management for excess risk taking, corporate collapse or taxpayers bailouts.

FEDERAL PRE-EMPTION OF STATE BANKING RULES: Grade C+

Overturns OCC tool John Dugan Federal pre-emption of state regulations. states to impose their own stricter consumer protection laws on national banks. National banks can seek, and will likely receive exemptions from state laws, undercutting this entire law.

DEPOSIT INSURANCE: Grade B-

Permanently increases FDIC for banks, thrifts and credit unions to $250,000. Fly int he ointment: Congress failed to fund this, although the FDIC will be covered by taxpayers if and when they run out of cash . . .

CONSUMER AGENCY: Grade D+

The new Consumer Financial Protection Bureau is a half decent idea, but the exemption for Auto Dealers — the typical family’s 2nd biggest purchase is a car — is unconscionable. Putting the agency inside the Federal Reserve is beyond idiotic.

KC native
06-25-2010, 02:36 PM
That's not the scary line in the article, THIS one is:

"government would have broad new powers to seize and wind down large, failing financial firms and to oversee the $600-trillion derivatives market."

That's what they actually needed. The Fed and FDIC lacked authority to step in to take over the IB's. IF they had that authority the crisis could have been leveled off much faster.

Stewie
06-25-2010, 03:40 PM
That's what they actually needed. The Fed and FDIC lacked authority to step in to take over the IB's. IF they had that authority the crisis could have been leveled off much faster.

Explain to me how one oversees an unregulated derivatives market. That was the shit-can of worms that Lehman and Bear Stearns died from because there's no clearinghouse to guarantee anything.

orange
06-25-2010, 03:54 PM
Explain to me how one oversees an unregulated derivatives market. That was the shit-can of worms that Lehman and Bear Stearns died from because there's no clearinghouse to guarantee anything.

I don't know squat about derivatives - but this Bill does apparently address them.

DERIVATIVES: Grade B+

Moves most derivatives to exchanges, routed through clearinghouses,e etc. Customized swaps remain OTC, but have reporting requirements. New capital, margin, reporting, record-keeping and business conduct rules for firms that deal in derivatives. Failed to overturn CFMA.

Far enough, not far enough? What's missing?

irishjayhawk
06-25-2010, 11:36 PM
Since they don't know how to fix deep-water oil leaks, should they stop drilling deep-water wells?

Headshot.

Taco John
06-26-2010, 12:35 AM
Since they don't know how to fix deep-water oil leaks, should they stop drilling deep-water wells?


Where'd they get their permit for that, anyway? A Cracker Jack box?

Taco John
06-26-2010, 01:02 AM
In a free market system, the government wouldn't have liability caps, and an insurance company would be on the hook right now for this mess. If an insurance company was on the hook for this mess, they would do everything they could to limit their financial liability by demanding that certain criteria be met in order to qualify for the policy.

Is this perfect? Probably not. But it sure beats what we have now. The "mixed market" solution seems to have failed us.

|Zach|
06-26-2010, 08:09 AM
No, because it's really impossible to know either one for the most part. But to claim you really don't know how things will work until after the fact is pretty idiotic and would not fly for 99% of us in the private sector.

If you don't know, you don't do it. It's that simple. Hey, I am supportive of several aspects of this bill. But if I were to ever, in any of my jobs, go to my boss and say "let's do this" and then followed it up with "I really won't know how it will workout until we do it", I would have been told no until I had a pretty damn good idea of what would happen. And I had best had a plan to back stuff out should things go unexpectedly.

Hmmm....ok? :spock:

petegz28
06-26-2010, 10:13 AM
Since they don't know how to fix deep-water oil leaks, should they stop drilling deep-water wells?

I can't say that isn't a fair point. I don't know what criteria they had to meet. But having said that, we know the Fed Gov has been more than lax with the whole oil gig. Includind Obama. So that just goes to further my point.

KC native
06-26-2010, 03:10 PM
In a free market system, the government wouldn't have liability caps, and an insurance company would be on the hook right now for this mess. If an insurance company was on the hook for this mess, they would do everything they could to limit their financial liability by demanding that certain criteria be met in order to qualify for the policy.

Is this perfect? Probably not. But it sure beats what we have now. The "mixed market" solution seems to have failed us.

You really need to read up on AIG because they were on the hook along with many other firms which is why everyone was at risk. Do you ever expect anyone to take you seriously when you can't even get the basic facts of a situation right?