These are not great times for the financial industry. Examples of their hard times can be seen in the number of foreclosures, the repossessions, the sagging real estate market, struggling stocks, the trouble mortgage industry, the failed banks and mergers. The House passed a financial regulatory system bill. The bill still needs to pass the senate to become law. What is this bill? Who will gain from this bill? Who will be set back by this bill? Who will meet mix results from this bill?
The Washington Post described the bill “the most sweeping overhaul of the nation’s financial regulatory system since the Great Depression.” “The 1,279-page bill creates a new federal agency dedicated to consumer protection, establishes a council of regulators to police the financial landscape for systemic risks, initiates oversight of the vast derivatives market and gives the government power to wind down large, troubled firms whose collapse could endanger the entire financial system.”
In his blog for the Wall Street Journal Michael Corkery feel mortgage lenders, credit/debit card users, General Electric, and regulators will be the winners if this bill becomes law. Mortgage lenders would win because the bill would not allow bankruptcy judges “to adjust the terms of first mortgages.” Credit and Debit card users would win because the “bill would create a Financial Consumer Protection Agency to monitor lending practices and overdraft fees on debit cards.” General Electric wins “a concession in the bill to keep its financing arm, GE Capital” if the bill passes. Regulators will win even with the OTS going away because the bill “creates two new agencies, the consumer protection agency and the Financial Services Oversight Council, which monitors financial institutions to prevent them from posing systemic risk.” I would add President Obama to the list because he has “called financial reform one of his top priorities, alongside health care and climate change.” Consumers would also reap the benefits of having more secure financial organizations for their financial needs.
Corkery’s blog also listed losers from this bill. The losers would include big banks, hedge funds, large security companies, the Office of Thrift Supervision, and ambitious big banks. Big banks would lose by being subject “to higher capital and liquidity standards.” Big banks would lose as “the government would be allowed to break up even healthy large institutions that were deemed a threat to the broader economy.” Big banks that were ambitious enough to try to take over other banks would lose as “the Federal Reserve will not approve any merger that it thinks will pose a risk to the financial system.” Large security companies would lose as “the bill would prohibit proprietary trading if it put the firm’s safety and soundness at risk.” The Office of Thrift Supervision would be eliminated. Hedge funds would lose as registering with the SEC would expose “their below-the-radar investment strategies to greater public scrutiny.”
Big banks could have mix results as they could be mortgage lenders and lose for having to stay at higher standards and takeovers would be limited. Consumers would win on having an agency to protect them but the costs could find their way back to the consumer.
The Wall Street Journal
The Washington Post