US Senate passes Wall Street reform bill: Consumer organizations applaud

The Senate on Thursday approved a far-reaching financial regulatory reform bill that will bring a broad expansion of government oversight of financial markets. Large financial firms could be prohibited from proprietary trading and investing in hedge funds and private equity funds, most derivates will be forced on to exchanges or through clearinghouses, and the US Federal Reserve gains powers to supervise systematically important financial firms.

Consumer organizations praise the bill as being historic. The bill entails provisions for the creation of a Consumer Financial Protection Bureau housed in the Federal Reserve. Legislative Director of the Consumer Federation of America (CFA), Travis Plunkett, argues that this bill "is a big win for consumers". The reason is that the new Consumer Bureau will have authority over virtually all lenders.

Yet, the bill is not perfect from the view point of consumer organizations. The Obama administration and the House bill entailed provisions for the creation of a new independent Consumer Financial Protection Agency. The Senate bill now entails the establishment of  the Consumer Bureau within the Federal Reserve limiting its independence. Furthermore, new rules of the Bureau to protect consumers from risky financial products could be overturned by banking regulators if they believe the rules could threaten the stability of the financial system.

The Senate and Congress bills will now be reconciled. It is expected that this will be done prior to the 4th of July.


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Sources: Reuters and CFA