US Senate approves Wall Street reform bill

Wall Street reform bill approved

So that "Americans will never again pay for Wall Street's mistakes", the US Senate last night approved an overhaul of financial regulations. Passed with 59 votes to 39, the Wall Street reform bill will create new ways to watch for financial risks and make it easier to liquidate large failing firms.

While it still has to be merged with a version in the House and signed by the President to make it law, it is a major stance by the US government to throw their weight behind restructuring the big banks that were responsible for the economic recession. The main points of the Wall Street reform bill bans deposit-taking banks from proprietary trading, introduces a consumer financial protection bureau to police the sale of credit products and empowers the government to seize a failing systemically important firm.

Tightening Wall Street regulation

Of course the bill has been met with a measure of dismay from the financial industry and the last 24 hours has seen a large scale lobbying effort on their part, blaming market disruption on the Senate's plans.

In a speech after the bill had been past, President Obama said that the financial industry had repeatedly tried to block the regulatory reforms, using lobbyists, millions of dollars in advertising and special interest "loopholes".

"Today," he said, "I think it is fair to say these efforts have failed."

Republicans had tried to block the bill, with Republican Senator Richard Shelby saying the legislation would "have an impact on the lives of Americans for decades to come."

"Judgment will not be rendered by self-congratulatory press releases, but, rather, by the marketplace. And the marketplace does not give credit for good intentions."

By reigning in the banks' risk-taking, many in the financial sector believe that the Wall Street reform bill will do serious harm to the banking sector. Speaking to the Financial Times, Ed Yingling, head of the American Bankers Association said, "Many of these negative provisions have nothing to do with the financial crisis. Despite all the talk about this being a Wall Street bill, it, in fact, does tremendous harm to traditional banks on Main Street that had nothing to do with the crisis and that will now be less able to support the economy."

He went on to say, "This bill promised much-needed reform but has gone terribly wrong."

However with public support behind reforming the banking system, Wall Street's complaints are liable to fall on deaf ears, but President Obama was quick to stress that the reform bill was there to punish the banks but to prevent another recession in the future.

"Our goal is not to punish the banks but to protect the larger economy and the American people from the kind of upheavals that we've seen in the past few years," the President said in his speech. "And today's action was a major step forward in achieving that goal."

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Timon Singh

Timon Singh is a graduate of Liverpool University where he received a degree in Social and Economic History. He has previously worked for BBC Magazines on BBC Who Do You Think You Are? Magazine, the publication for the popular genealogy show.

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