WASHINGTON, July 21 (Xinhua) -- U.S. President Barack Obama on Wednesday signed into law the financial regulation reform bill, the most ambitious rewrite of the country's financial-regulatory system since the Great Depression.
The 2,300-page legislation aims to curb Wall Street's high-risk practices blamed for the global economic meltdown of 2008, solve the systemic risk of the "too big to fail" problem among financial firms, and create a consumer protection agency to better protect Americans.
"These reforms represent the strongest consumer financial protections in history," Obama said at the signing ceremony at the Ronald Reagan Building a few blocks from the White House. "These protections will be enforced by a new consumer watchdog with just one job: looking out for people -- not big banks, not lenders, not investment houses in the financial system."
Under the new law, an independent office called Consumer Financial Protection Bureau will be established under the Federal Reserve to oversee financial products and services such as mortgages, credit cards and short-term loans.
"Reform will also rein in the abuse and excess that nearly brought down our financial system. It will finally bring transparency to the kinds of complex, risky transactions that helped trigger the financial crisis," said Obama.
The new law requests transactions of risky derivatives that have been out of the sight of regulators to be moved to more transparent exchanges and conducted through independent clearinghouses.
Obama also promised that "the American people will never again be asked to foot the bill for Wall Street's mistakes."
"There will be no more taxpayer-funded bailouts. If a large financial institution should ever fail, this reform gives us the ability to wind it down without endangering the broader economy. And there will be new rules to make clear that no firm is somehow protected because it is 'too big to fail,' so that we don't have another AIG."
The new measure gives the government new powers to break up companies that threaten the economy. Large, failing financial institutions would be liquidated and the costs assessed on their surviving peers.
The financial regulation bill represents another legislative triumph of Congressional Democrats along with the passage of economic stimulus package and healthcare reform bill, but its real impact might not be felt for years.
After gaining the president's signature, the bill now heads to about 10 regulatory agencies which will write hundreds of new rules governing finance. How regulators interpret provisions in the bill will finally decide its real impact.
"It doesn't mean our work is over. For these new rules to be effective, regulators will have to be vigilant," Obama stressed.
For example, the Federal Deposit Insurance Corp. is required to create a mechanism to liquidate failing large financial firms that threaten the financial system; the Treasury Secretary is to start setting up the new consumer financial protection agency; the Commodities Futures Trading Commission and the Securities and Exchange Commission have to lay out the rules forcing many derivatives on to clearinghouses and exchanges.
Among the biggest questions after the enactment of the law is who the president will select to head the new Consumer Financial Protection Bureau. The White House said that Elizabeth Warren, a Harvard law professor, is considered a leading candidate for the job. Warren was among the first to propose the idea of a new agency for financial consumers and is the chairman of a congressional panel overseeing the Troubled Asset Relief Program.
But Christopher Dodd, co-author of the new financial regulation bill, said in a recent interview that Warren may not have sufficient support to win confirmation to the post.
Republicans continued to blast the new law, saying it would kill jobs and do nothing to prevent another financial crisis.
"While President Obama pats himself on the back today, families and small businesses are bracing for yet another big- government overreach that will make it harder to create new jobs," said House Minority Leader John Boehner. "The legislation the president is signing today provides permanent bailouts for his Wall Street allies at the expense of community banks and small businesses around the country, while doing nothing to reform Fannie Mae and Freddie Mac, the government mortgage companies that triggered the financial meltdown by giving too many high-risk loans to people who couldn't afford them," he argued.
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