Financial Regulation Reform On Deck

A major post-financial crisis new financial regulation package that has been discussed for months is being introduced. An eleven page summary of the proposed Senate bill (which differs in some details from the House bill compared here) can be found here.

Highlights include:

* A comprehensive, semi-independent consumer finance regulatory agency housed in the Federal Reserve.

* FDIC-like resolution authority for non-bank financial firms, with an FDIC-like fee to fund it.

* New capital and leverage requirements for large financial firms.

* Increased disclosure requirements for derivatives, private equity and hedge funds, and limitations on propietary trading by publicly held companies in private equity and hedge funds.

* Increased regulation of mortgage brokers, municipal bond professionals, and payday loans.

* Increased regulation of firms that assign credit ratings to securities.

* Appointment of top Federal Reserve officials would be more in the hands of the President and less in the hands of member banks, some of whom are now also regulated by the Fed. The Federal Reserve would be subject to more stringent audits of its emergency lending.

* Bank regulation will not be unified. The FDIC (for state banks and thrifts), Office of Comptroller of the Currency (for small national banks and federal thrifts), and Federal Reserve (for 35 largest national banks and federal thrifts) will continue to divide responsibility for bank regulation.

* The jurisdictional boundaries between the CFTC and the SEC will be clarified, but both regulators will continue to exist as separate entities.

* Shareholders in public companies would be given a greater ability to nominate directors and a non-binding vote on executive compensation. Executive compensation based upon inaccurate financial statements could be disgorged.

* Increased enforcement powers of existing financial regulation laws.

The reforms aren't revolutionary, but they are progress. They also give agencies the power to enact significantly more bold specific measures through the regulatory process.