A major overhaul of financial sector regulations in reaction of the financial crisis has been passed by Congress and the President says that he will sign the bill (see also here).
The bill draws clearer jurisdictional lines in financial regulation while reducing the number of agencies involved, consolidates consumer protection functions in an independent agency within the Federal Reserve, imposes more regulation on the kinds of transactions that were at the heart of the financial crisis (like secret derivative transactions and hedge fund investments owned by banks trading on their own accounts), gives regulators greater room to prevent institutions from becoming "too big to fail," and creates FDIC-like authority to resolve the affairs of non-FDIC regulated financial institutions. The bill also gives member banks a smaller say in selecting Fed officials who have the power to make public policy. And, in a notable move regarding corporate governance of public companies it give shareholders a greater ability to nominate directors and have a non-binding say in CEO pay.
Some key provisions governing how bond rating agencies are selected designed to reduce conflicts of interest in the process, limitations on leverage in large financial institutions, and oversight authority over new financial structures, were deferred to the regulatory process. Automobile dealer financing was exempted from the consumer regulation package. Intense lobbying over those implementing regulations, which are already being drafted, is underway.
The bill permanently exempt companies with less than $75 million in market capitalization from having to comply with the Sarbanes-Oxley Act's Section 404(b) auditor attestation requirements.
This adds a major legislative accomplishment for the President to already passed health care reform, various stimulus bills, a U.S. Supreme Court appointment. President Obama's second U.S. Supreme Court nomination, Elana Kagan, is likely to be approved before the next election.
The bill continues a trend in which Democrats have passed major legislation on a largely partisan basis, with the Republicans acting as "the party of no." Just three Senate Republicans (Scott Brown of Massachusetts, Olympia Snowe of Maine, and Susan Collins of Maine) joined Senate Democrats in defeating an attempt to filibuster the legislation. But, the GOP strategy has had few legislative success so far other than blocking an extension of unemployment benefits.