Yesterday saw huge financial reform in the US move one step closer as the Senate passed an historic bill in a tight vote. President Obama is expected to sign the bill, making it law, this week.
The reform package, over 2,300 pages long and the result of twelve months of negotiations, aims to reduce the chances of future financial collapses by reigning in the more risky banking practices blamed for the recent problems.
Many commentators, including from the Globe and Mail, and the National Post, write that this set of reforms herald the biggest change in Wall Street’s setup since The Great Depression in the 30’s.
The bill was passed in the Senate with votes roughly along party lines, with three Republicans (Olympia Snowe and Susan Collins of Maine and Scott Brown of Massachusetts) voting for the bill and just one Democrat (Senator Russell Feingold), voting against it.
The reforms within the bill will tackle, first and foremost, the out-of-date laws on financial transactions. There will also be significant reform for home mortgages, student loads, payday lenders and credit cards. For example, a mortgage broker will now be required to provide greater transparency in any negotiations, as well as accept more accountability for actions.
Many Republican senators are concerned that the tighter controls passed by this new bill will drive businesses out of the States, either into more stable countries, perhaps like Canada, or to countries with less stringent regulations, perhaps in Europe. As Republican Senator Saxby Chambliss puts it, “What we’re going to wind up doing is we’re going to be driving jobs and business overseas with this massive piece of legislation that truly doesn’t address the problem.”
Of course, it’s incredibly difficult to speculate on the long-term effects of such a game-changing reform package. For the Democrats, the bill is as much about forestalling another crash as it is about fixing the current problem: as Christopher Dodd, a key Democrat in the formation of the bill, puts it: “We will fundamentally change the way our financial system is regulated, to rein in Wall Street and create a sound foundation to grow our economy and create jobs.”
