Obama's Wall Street reform: Senate passes biggest financial regulation bill since Great Depression

Roberts/Bloomberg

President Obama was handed a major policy victory, with the Senate passing the bill on a 59-39 vote on how to regulate Wall Street

Source :BY Michael Mcauliff,DAILY NEWS WASHINGTON BUREAU : Thursday, May 20th 2010, 11:56 PM

WASHINGTON - Landmark finance reform that would rein in ruinous risk-taking on Wall Street and protect consumers passed the Senate last night, all but sealing a victory for another key piece of President Obama's agenda.
The bill would create an aggressive consumer financial watchdog, give the feds power to intervene in dangerously risky markets and firms, and regulate the complex financial instruments that imploded in the 2008 meltdown.
A top goal is to make sure banks and financial houses are no longer "too big to fail," the predicament that forced taxpayers to pony up a $700 billion rescue.
"The American people will never again be asked to foot the bill for Wall Street's mistakes. There will be no more taxpayer-funded bailouts - period," Obama declared shortly before the bill passed on a 59 to 39 vote.
The independent consumer watchdog would be housed under the Federal Reserve, empowered to police all sorts of firms offering financial products to people.
It would have broad powers to write rules to make sure consumers get clear, accurate information about mortgages, credit cards and other products.
It also would crack down on hidden fees, abusive terms and deception.
"From now on, every consumer will be empowered with the clear and concise information that you need to make financial decisions that are best for you," Obama vowed.
The bill - the greatest overhaul of the finance system since the Great Depression - also contains a controversial provision to get Wall Street banks out of the risky swaps and derivatives business. Mayor Bloomberg has complained that move would hurt the local economy.
Firms in the city handle trillions of dollars worth of such derivative deals, earning them billions. But reform backers note the city economy got hammered when huge numbers of secretive derivative deals - essentially bets on underlying securities - turned toxic as mortgages they were based on went bust.
The bill still has to be reconciled with a similar measure in the House, which imposes new regulation on the swaps and derivatives trade but lets banks stay in that business.
Supporters of the House version say shutting out banks would force the trade overseas, and keep it in the dark, largely unregulated.
Some Senate insiders think the House version will win out.
mmcauliff@nydailynews.com