Obama sacrifices banks and begins a historic reform of the U.S. financial system

Obama signed a law on the reform of financial system

In brief: Financial reform, that began Obama, will affect the country's banking system. Banks began to suffer because of the problems of the White House.

President Obama signed into law the most radical since the Great Depression of the 1930 reform of the mechanisms regulating the U.S. financial system. The main purpose of the law is to prevent the recurrence of financial crisis in the U.S. two years ago and then engulfed the entire world. “Legislation on the reform of financial regulation is a necessary and far-reaching step towards preventing the recurrence of the recent financial crisis,” – said on the eve of the signing of the law Fed Chairman Ben Bernanke.

And when signing a document of Barack Obama said that the new law would ensure “compliance with all of one set of rules so that companies will compete in price and quality, but not in the tricks and gimmicks.” He added: “Our financial system has been successful, and our free market only when there are clear rules and monitoring mechanisms to prevent abuses and excesses that provide benefits only to those who play by the rules and not trying to cheat the system.” One of the main provisions of the Act is the financial protection of consumers. For these purposes will be established an independent agency within the Federal Reserve System. It is, in particular, will issues of mortgages, which plays a key role in the functioning of the American economy. The Act also introduces so-called Volcker rule (on behalf of Paul Volcker, head of the Fed in 1980). According to him, government regulators will have almost unlimited power over Wall Street. They will control where and how much money is invested, will see to it that financial companies do not grew to giant size, and set the size of bonuses to top managers.

Now, state regulators not only have more control over the financial sphere, but may at its discretion to eliminate large troubled banks. And to avoid history repeating itself collapse Lehman Brothers, the law provides for the establishment of the commission, which will be “orderly liquidate the firm, are on the verge of bankruptcy.

The law strengthens the monitoring of OTC trading, the transactions in derivative securities, and requires registered private equity funds, while exempt from this procedure, venture capital funds. The law tightens the rules for mortgage and consumer lending, increase transparency for students, borrowers, and ordinary investors.

But the law provides limited opportunities for banks in conducting their own operations in the market at their own expense. Credit structures will be able to invest in hedge funds and private-equity funds in an amount not to exceed 3% of their Tier I capital, and possess no more than 3% of capital of these funds. Restrict the ability of banks participating in the program of federal insurance and derivatives trading.

Political victory

Barack Obama called them signed the law a necessary measure to prevent further economic disaster, stating that the current economic problems the U.S. is largely due to “failure in our financial system” and “irresponsibility in some companies, Wall Street and the corridors of power in Washington.” Analysts say that the law came into force is a major political victory for the president and the Democrats. He called the heated debate and opposition Republicans in both houses of Congress. But in the end, July 1 fiscal reform approved by the House of Representatives, and two weeks later, the bill approved by 60 votes in favor, 39 against and the U.S. Senate. Moreover, reform of financial regulation – this is the second extraordinary victory for Barack Obama. The first was the reform of the health system, pierced by the U.S. administration and the Democratic majority in Congress. Obama may be pleased with himself.

Igor Tringlers
2010-07-21 22:53, Economics.

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