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RISMEDIA, July 23, 2010—(MCT)—With a broad smile and the stroke of a
pen, President Barack Obama capped a contentious 18-month struggle and
signed into law the broadest revamp of financial regulation since the
Great Depression.

“Passing this bill was no easy task. To get there, we had to overcome
the furious lobbying of an array of powerful interest groups and a
partisan minority determined to block change,” Obama said in a
pre-signing speech, surrounded by cheering congressional leaders and
administration members.

Alternating between hitting Wall Street and acknowledging its economic
importance, the president said that the historic Restoring American
Financial Stability Act of 2010 seeks to strike a balance that would
protect consumers while allowing the vital financial sector to prosper.

“The fact is the financial industry is central to our nation’s ability
to grow, to prosper, to compete and to innovate. This reform will foster
innovation, not hamper it. It is designed to make sure everybody follows
the same set of rules,” he said. “Unless your business model depends on
cutting corners or bilking customers, you’ve got nothing to fear from
reform.”

The signing marked the third major legislative accomplishment for Obama,
after an $800 billion stimulus and tax-cut package and a regulatory
revamp of the health care sector. Still, the president has slumped in
the opinion polls, dragged down by a sluggish economy. Polls also
suggest that the broader public is ambivalent about the new measure.

To combat that, Obama and congressional Democrats went to extremes to
highlight all the consumer provisions in the legislation. There are
numerous measures to combat predatory lending, and the president invited
borrower Robin Fox of Rome, Ga., to the speech. She’d been hit with
unexpected interest rate increases on a credit card balance. “With this
law, unfair rate hikes, like the one that hit Robin, will end for good,”
Obama said.

Underscoring the historic nature of the legislation, which updates many
rules that date to the 1930s, the televised signing ceremony wasn’t at
the White House but at the Ronald Reagan Building, in a large auditorium
where about 400 invited guests could bask in the accomplishment.

The legislation seeks to fix much of what went wrong in the lead-up to
the nation’s deep financial crisis. It gives regulators the power to
dissolve large, interconnected financial institutions and allows the
Federal Reserve to break up companies that it thinks are so large that
their failure would pose a risk to the U.S. and global economy.

The lack of this authority forced the Bush administration and a
Democratic-led Congress to choose unpopular bank bailouts over a
disruptive bankruptcy process that Fed Chairman Ben Bernanke warned
could have led to a global economic depression.

“The bill isn’t perfect, since it represents what was politically
achievable in an election year. But it sets some important starting
points for more detailed work in areas where oversight has been lacking,
such as viewing risk from a systemic point of view and increased
consumer protection,” said Scott McCleskey, the author of the new book
When Free Markets Fail, which seeks to explain the crisis in layman’s
terms. “In the end, though, the crisis made abundantly clear the fact
that we need more regulation because the markets have become too complex
to regulate themselves.”

For ordinary Americans, the legislation will be felt most directly
through the creation of a new and independent Bureau of Consumer
Financial Protection. It will police credit extended to consumers, be it
mortgages, credit cards, student loans, auto loans or even payday loans.

“For the first time, families will have a tough, independent cop in
Washington to help clear out the tricks and traps hidden in consumer
credit agreements,” Elizabeth Warren, a Harvard University professor
who’s credited with developing the idea of the bureau, said in a statement.

Gail Hillebrand, a senior attorney for the advocacy group Consumers
Union, added that “millions of Americans have been hit by shady loans,
hidden fees and surprise rate increases, and this Consumer Financial
Protection Bureau will take dead aim at these kinds of problems.”

Business groups frowned on the new law. “This legislation, while drafted
with the best intentions, paints the U.S. business community with a
broad brush and will have many unintended consequences for the more than
12,000 nonfinancial publicly traded companies,” Larry Burton, the
executive director of the Business Roundtable, said in a statement.

The U.S. Chamber of Commerce, which aggressively lobbied against the
legislation, didn’t pull punches in its statement upon signing. “Such a
broad, sweeping bill epitomizes a law with unintended consequences that
creates more uncertainty for American businesses,” said Thomas J.
Donohue, the chamber’s president and CEO. “For years the chamber has
called for reform that modernizes our financial system. Yet this law is
like adding new paint on an old car; it’s still not going to run at the
pace and with the agility that is currently demanded.”

Regulators will sit together on a special council to collectively study
risks to the broader financial system. They’ll be empowered to order
that banks keep more capital on hand to guard against future losses, and
they’ll have knowledge that they didn’t have before about the complex
financial instruments called over-the-counter derivatives. The size of
the market for these private bets between parties is valued in the
trillions of dollars, yet these deals largely have been hidden from
regulators.

Now, most trading in these complex instruments will be done on public
exchanges or clearinghouses, and regulators will have the authority to
limit a financial player’s overall holdings in contracts for oil,
natural gas, wheat or other commodities if it appears that anyone is
seizing so much of the market that prices could be manipulated.

“It gives us the transparency, tools and teeth we need to better
regulate the markets we already oversee and to bring light to the more
than $600 trillion over-the-counter markets which are currently
unregulated,” said Bart Chilton, a commissioner on the Commodity Futures
Trading Commission (CFTC). “Many key items will be decided in the near
future: How do we actually oversee and regulate the OTC markets? How do
we implement position limits? And how are we going to use some of these
new professional-grade regulatory tools to police these markets? For
example, CFTC has had only one successful manipulation prosecution in 35
years. The law was broken but the bill gives us new authority to go
after disruptive trading practices.”

(c) 2010, McClatchy-Tribune Information Services.

–
Bojana (Bo) Foster, Broker
Voted Best Agent 2006 ~ 2009 in the Best of Nisqually
Signature Service Real Estate, Rainier
360 446-4646 ext 11
Bo@SignatureService.com
www.SignatureService.com

“…Buy Land. They’ve stopped making it”.
Mark Twain