Wall St reform clears Congress, goes to Obama

WASHINGTON, (Reuters) – The U.S. Congress yesterday approved the broadest overhaul of financial rules  since the Great Depression and sent it to President Barack  Obama to sign into law.

By a vote of 60 to 39, the Senate passed a sweeping measure  that tightens regulations across the financial industry in an  effort to avoid a repeat of the 2007-2009 financial crisis.

Wall Street had fought bitterly to derail the legislation,  which leaves few corners of the financial industry untouched.  It establishes new consumer protections, gives regulators  greater power to dismantle troubled firms, and limits a range  of risky trading activities in a way that would curb bank  profits.

“Unless your business model depends on cutting corners or  bilking your customers, you have nothing to fear from this  reform,” Obama said. He is expected to sign the bill into law  next week.

The Senate vote caps more than a year of legislative effort  after Obama proposed reforms in June 2009. The House of  Representatives approved the legislation last month. Financial  markets showed little reaction yesterday as investors had  already factored in the bill’s impact.

Although Obama originally had hoped for bipartisan support  for reform, only three Republican senators voted in favor of  the bill, joining 55 Democrats and two Indepen-dents. One  Democrat opposed it.

With Republicans poised for big gains in the November  congressional elections, Democrats are eager to show voters  that they have tamed an industry that dragged the economy into  its deepest recession in 70 years.

“I regret I can’t give you your job back, restore that  foreclosed home, put retirement monies back in your account,”  said Democratic Senator Christopher Dodd, one of the bill’s  chief authors. “What I can do is to see to it that we never,  ever again go through what this nation has been through.”

JPMorgan Chase & Co, the second-largest U.S. bank, said the  bill would not compromise its business model but might hurt  profitability. “We’ll have some effect on revenues and margins  and volumes,” its chief executive, Jamie Dimon, said on a  conference call.

As the largest U.S. derivatives dealer, JPMorgan could have  the most to lose from the bill, which aims to curb lucrative  trading in risky over-the-counter derivatives and force banks  to end trading for their own profits.

Along with the health-care overhaul, Democrats can now  point out that they have passed two far-reaching reform efforts  that will likely shape American society for generations.

It is not clear whether that will impress voters.

The public’s understanding of the regulatory revamp is very  low, according to an Ipsos online poll released yesterday. Of  those polled, 38 percent had never heard of the reform, while  33 percent had heard of it but knew nothing about the bill.  Other polls show the public divided about its merits.

And even as Democrats hope the regulatory crackdown will  help them win support in the November elections, many voters  remain angry at lawmakers for spending hundreds of billions in  taxpayer dollars to prop up Wall Street while Main Street  struggled amid a deep recession.

The legislation has also won Democrats few friends on Wall  Street as wealthy donors have started to steer more campaign  contributions to Republicans.

Under the 2,300-page bill, mortgage brokers, student  lenders and other financial firms will have to answer to a new  consumer-protection authority, though auto dealers will escape  scrutiny.

Regulators, who scrambled to contain the damage from  failing firms like Lehman Brothers in the last crisis, will  have new authority to dismantle troubled firms if they threaten  the broader economy.

A council of regulators will monitor big-picture risks to  the financial system and many large banks will have to set  aside more capital to help them ride out tough times.

Large private-equity and hedge funds will face more  scrutiny from federal regulators, and credit-rating agencies  could potentially see their entire business model upended.

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