In an attempt to hinder future economic crises, the House approved the Financial Overhaul Bill last week, according to the New York Times. It was the source of much debate and opposition from both sides and had been drafted over the course of the year. It passed 237 to 192.
The bill gives government regulators the authority to liquidate failing financial companies by breaking them apart, selling assets and forcing creditors and shareholders to take losses so that taxpayers do not pay the bill.
It also expands regulatory powers of the Fed, and establishes a risk council held by high-ranking officials led by the Treasury Secretary to detect potential threats to the financial and economic systems. It also creates a powerful new consumer bureau to protect consumers and prevent practices that may potentially lead to economic hardship. The Securities and Exchange Commission also gained new powers in fund regulations and credit rating agencies.
The measure restricts the ability of banks to invest and trade for their own accounts — a provision known as the Volcker Rule, for its proponent, the former Fed chairman, Paul A. Volcker — and creates a new regulatory framework for derivatives, the complex financial instruments that were at the heart of the 2008 crisis.
The bill comes with many changes to several areas:
- Mortgages
- Credit/Debit Cards
- Equity Indexed Annuities
- Fiduciary Duties
- Credit Scores
Find out what major changes you can expect from the mortgage industry.
The Financial Overhaul Bill comes during a global economic downturn and the worst financial crisis we have faced since the Great Depression. Oddly, the bill does not address the two government controlled mortgage giants Fannie Mae and Freddie Mac who recently de-listed their stock from the New York Stock Exchange because of their decreased value. Time will tell if new regulation is to come, but for now, these are the latest changes.
