HR 4173 passed along party lines, and even as Democrats pat themselves on the back for a massively useless job well done, key exclusions persist, and millions of gaping loopholes simply invite bankers to find new and unpredictable ways in which to blow themselves up.
Some derivatives transactions would be forced onto so- called swap execution facilities. Hedge funds, airlines and corporate end-users that don’t pose a risk to the financial system won exclusions from the bill’s clearing, trading and collateral requirements.
Hedge funds don't pose a risk? So in the administration's revisionist rewriting of history, LTCM has been relegated to a just slightly leveraged boiler room. Then again, at least it was lead by intellectual comparables of our own fine President (at least according to the Nobel prize committee's astute conclusions.)
And here are the party lines determinations on HR 4173, which at well over 1,000 pages, one can bet has not been read cover to cover by any one single person.
- Increase Consumer Protections: Creates the Consumer Financial Protection Agency (CFPA), a new, independent federal agency solely devoted to protecting Americans from unfair and abusive financial products and services.
- Create a Financial Stability Council: Creates a council of regulators that will identify financial firms that are so large, interconnected, or risky that their collapse would put the entire financial system at risk. These systemically risky firms will be subject to increased oversight, standards, and regulation.
- End Taxpayer Bailouts and “Too Big to Fail”: Establishes an orderly process for shutting down large, failing financial institutions like AIG or Lehman Brothers in a way that ends bailouts, protects taxpayers, and prevents contagion to the rest of the financial system.
- Rein in Executive Compensation: Gives shareholders a “say on pay” – an advisory vote on pay practices including executive compensation and golden parachutes. It also enables regulators to ban inappropriate or imprudently risky compensation practices, and it requires financial firms to disclose incentive-based compensation structures.
- Safeguard Investors: Strengthens the SEC’s powers so that it can better protect investors and regulate the nation’s securities markets. It responds to the failures to detect the Madoff and Stanford Financial frauds by ordering a study of the entire securities industry that will identify needed reforms and force the SEC and other entities to further improve investor protection.
- Regulate Derivatives: Regulates, for the first time ever, the opaque $600 billion over-the-counter (OTC) derivatives marketplace. Under the bill, all standardized swap transactions between dealers and “major swap participants” would have to be cleared and traded on an exchange or electronic platform. The bill defines a major swap participant as anyone that maintains a substantial net position in swaps, exclusive of hedging for commercial risk, or whose positions create such significant exposure to others that it requires monitoring.
- Outlaw Predatory Mortgage Lending Practices: Would incorporate the tough mortgage reform and anti-predatory lending bill the House passed earlier this year. The legislation outlaws many of the egregious industry practices that marked the subprime lending boom, and it would ensure that mortgage lenders make loans that benefit the consumer. It would establish a simple standard for all home loans: institutions must ensure that borrowers can repay the loans they are sold.
- Require the Registration of Hedge Funds: Closes a regulatory hole that allows hedge funds and their advisors to escape any and all regulation. This bill requires almost all advisers to private pools of capital to register with the SEC, and they will be subject to systemic risk regulation by the Financial Stability regulator.
What a joke.