Wall Street Reform and Consumer Protection Act

House Passes the Wall Street Reform and Consumer Protection Act without help from the Republicans.

Friday afternoon the House of Representatives passed new legislation that will change the way Wall Street and consumer lenders do business. By a vote of 223 to 202, lawmakers passed the HR 4173 The Wall Street Reform and Consumer Protection Act without a single vote from Republicans.

The 1,280 page bill will relieve the Federal Reserve of much of its power to write consumer protection laws and give it to a new Financial Protection Agency. The legislation establishes a council of regulators charged with identifying those firms that are deemed too large to let fail, and imposing oversight, standards, and regulation. It also creates a process for shutting down financial firms to avoid future taxpayer bailouts. Critics believe it will lead to the break-up of perfectly healthy institutions just because regulators feel they are too large.

According to the new legislation, stockholders will have the power to vote on executive compensation including pay and golden parachutes. It will also require companies to disclose any incentive-based compensation plans.

The bill will require dealers and major swap participants to clear swap transactions and exchange them on an electronic platform. According to the new bill a major swap participant is anyone that maintains a substantial net position in swaps, exclusive of hedging for commercial risk.

The new bill requires Hedge Funds to register with the Securities and Exchange Commission where they will be subject to systemic risk regulation by a financial stability regulator.

The SEC (Securities and Exchange Commission) will be given increased power and is authorized to conduct a complete study of the entire securities industry to identify needed reforms to prevent another Madoff ponzi operation.

Wall Street and banks have fought hard against such regulation and will keep fighting it in the Senate. Opponents of the bill won a major victory in the House by defeating a part of the legislation that would have given bankruptcy judges the power to modify consumer’s mortgage loans.

No doubt the fight will continue for some time to come. Banks will oppose any legislation that takes power out of their hands. More than one bank is chafing under the government's watchful eye after accepting a bailout. Now that they have the money they would love for the Government to take a step back and let them do their own thing.

Proponents of the legislation believe it's about time execs who run a business into the ground are given tin, not gold parachutes to exit a company. Putting more power into the hands of shareholders might make a difference.