Some notes on the Financial Regulation BIll

A marked up copy of the about 2,000 page bill is here.

Some aspects of the bill are here:

Lawmakers agreed to a provision known as the "Volcker" rule . . . which prohibits banks from making risky bets with their own funds. To win support from Sen. Scott Brown (R., Mass.), Democrats agreed to allow financial companies to make limited investments in areas such as hedge funds and private-equity funds.

The move could require some big banks to spin off divisions, known as proprietary-trading desks, which make bets with the firms' money. . . .

To pay for some of the new government programs, the bill would allow the government to charge fees to large banks and hedge funds to raise up to $19 billion spread over five years. . . .

Government-controlled Fannie Mae and Freddie Mac remain a multibillion dollar drain on the U.S. Treasury, and largely untouched by this proposal. . . .

Democrats softened the bill's impact on community banks, auto dealers, and small payday lenders and check cashers. . . .

The bill also includes a provision, authored by Sen. Blanche Lincoln (D., Ark), which would limit the ability of federally insured banks to trade derivatives. This provision almost derailed the bill following vehement objections from New York Democrats. Ms. Lincoln worked out a deal in the early hours of Friday morning that would allow banks to trade interest-rate swaps, certain credit derivatives and others—in other words the kind of standard safeguards a bank would take to hedge its own risk.

Banks, however, would have to set up separately capitalized affiliates to trade derivatives in areas lawmakers perceived as riskier, including metals, energy swaps, and agriculture commodities, among other things. . . .

From the New York Times:

basically a 2,000-page missive to federal agencies, instructing regulators to address subjects ranging from derivatives trading to document retention. But it is notably short on specifics, giving regulators significant power to determine its impact — and giving partisans on both sides a second chance to influence the outcome.

The much-debated prohibition on banks investing their own money, for example, leaves it up to regulators to set the exact boundaries. Lobbyists for Goldman Sachs, Citigroup and other large banks already are pressing to exclude some kinds of lucrative trading from that definition.

Regulators are charged with deciding how much money banks have to set aside against unexpected losses, so the Financial Services Roundtable, which represents large financial companies, and other banking groups have been making a case to the regulators that squeezing too hard would hurt the economy. . . .

From Politico:

Dodd, to reporters afterward: “The harmonization of our rules, particularly with those in the European community, Pacific Rim, I think will be awfully important. And the United States, having completed this work -- we hope in the next week -- can offer some leadership to the world …

Translation: If the rest of the world doesn't impose similar restrictive rules, the financial industry will leave the country.

So what did the administration do?

The administration was less involved than expected. But when the administration weighed in, it was to push toward TOUGHER language. An industry lobbyist says administration officials were on the Hill all day “and cornered Dems to know down pro-industry amendments at every turn.”

Now Obama wants a bigger $90 billion tax on banks.

Obama wants to slap a 0.15 percent tax on the liabilities of the biggest U.S. financial institutions to recoup the costs to taxpayers of the financial bailout.

"We need to impose a fee on the banks that were the biggest beneficiaries of taxpayer assistance at the height of our financial crisis -- so we can recover every dime of taxpayer money," Obama said in his weekly radio and Internet address. . . .

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