Unfortunately the new financial reform bill that will most likely be signed into law by July 4 does not bring back the stringent regulations of the Glass-Steagall Act that was revoked in 1999. Too many lobbyists had too much influence.
From the Los Angeles Times:
…the overhaul legislation wouldn’t force big banks — the target of much public criticism during the crisis — to shrink.
In contrast, in the 1930s, the landmark Glass-Steagall Act forced banks to separate their riskier investment banking operations from their commercial banks, which predominantly take deposits and make loans. The idea was to protect commercial banks, which are backed by federal deposit insurance, from devastation during financial crises. The Glass-Steagall provision, however, was repealed in 1999.
Moving back in the direction of Glass-Steagall, the Obama administration proposed the so-called Volcker rule, developed by former Federal Reserve chief Paul Volcker. The rule was one of the most contentious elements of this week’s negotiations. The final compromise limits banks to investing no more than 3% of their capital in hedge funds, private equity funds and proprietary trading desks.
On derivatives, the banks would be forced to move some particularly risky trading into separate entities. Virtually all derivatives would have to be traded through a clearinghouse, bringing down some of the profits from the private derivatives deals in which the banks currently engage.
New York Times reporter Binyamin Appelbaum had this article:
“I don’t know that there has been a bill that has touched as many different substantive areas as this one,” said A. Patrick Doyle, a partner at Arnold & Porter who has worked on financial issues for three decades. “Clearly there’s going to be a lot of work.”
The surge in hiring has sent a joke bouncing around Washington: Congress finally passed a jobs bill — full employment for lawyers.
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