UPDATE – House Representatives Pass Financial Regulation Changes

Over a year after economic failures brought Wall Street institutions crashing into recession, the US House of representatives has finally passed legislation that has been called the greatest restructuring of US financial legislation since the New Deal.

House floor

The House Split

The vote ended up in a 223-203 split, with no Republicans voting for the bill, and 27 Democrats voting against it. The House made some minor changes to the 1,279 page bill, but it will encompass both major and minor banks and lenders, and force firms that offer lending products to consumers to answer to a new agency, the Consumer Financial Protection Agency. Hedge funds and private capital firms would also have to report for the first time to the Securities and Exchange Commission.

The biggest consequences of this bill will be for the mega-banks, who will be subject to more intense regulation and requirements concerning their capital liquidity. The government will also be allowed to break up large financial institutions that pose a perceived threat to the stability of the US financial system. Additionally, the legislation addresses the $450 trillion over-the-counter derivatives market, which include credit default swaps, which act as insurance against defaulting on a debt.

Bill Moves to the Senate

Now that the bill has passed the House, Republican and the banking industry and attempting to scale back some of the stronger language of the bill. More than 30 amendments were considered by Representatives, including a proposal that was voted down that would exempt smaller banks from paying the costs of large firms failing. The banking industry has targeted the Consumer Financial Protection Agency as one of the pieces of the bill that it hopes will be removed by the Senate.

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