US House passes historic financial sector overhaul

The US House of Representatives approved the most sweeping regulatory overhaul of the financial sector since the Great Depression of the 1930s, one of President Barack Obama's key goals.

Lawmakers voted 223-202 to pass the 1,300-page legislation, a package of measures Obama's Democratic allies crafted in response to the global financial meltdown of 2008, which has left the US economy still sputtering.

The US Senate was expected to take up the plan -- which faces stiff opposition from the financial industry and its Republicans allies, not one of whom voted in favor of the plan -- in 2010.

Obama hailed the vote in a statement, adding: "I urge both houses of Congress to pass this necessary reform as quickly as possible on behalf of the American people. I look forward to signing a strong bill."

"The crisis from which we are still recovering was born not only of failure on Wall Street, but also in Washington. We have a responsibility to learn from it," said the US president.

Obama has hit out at Wall Street "fat cats," expressing anger that banks bailed out by the government again plan huge bonuses as millions of Americans battle poverty and unemployment.

"I did not run for office to be helping out a bunch of fat cat bankers on Wall Street," Obama said Friday in excerpts of an interview with CBS television to be aired on Sunday.

With unemployment still hovering at around 10 percent, amid a recession triggered in part by the excesses of financial institutions, Obama voiced frustration that "some people on Wall Street still don't get it."

Obama told CBS he believed some banks had paid back all the bailout funds in order to escape government controls regulating such things as bonuses.

"They're still puzzled why it is that people are mad at the banks. Well, let's see. You guys are drawing down 10, 20 million dollar bonuses after America went through the worst economic year... in decades and you guys caused the problem.

"These same banks who benefited from taxpayer assistance who are fighting tooth and nail with their lobbyists... up on Capitol Hill, fighting against financial regulatory control," Obama added.

Democratic House Speaker Nancy Pelosi has described the measure, a centerpiece of Obama's response to the 2008 global financial meltdown, as a clear warning to Wall Street that "the party is over."

"American families will no longer be at the mercy of Wall Street in terms of their jobs, their homes, their pension security, the education of their children," Pelosi said Thursday.

Lawmakers had faced votes on several amendments, defeating one that would have scrapped a central provision, the creation of a Consumer Financial Protection Agency (CFPA) to oversee mortgages and credit cards.

The bill, which may help Democrats harness simmering voter anger ahead of the 2010 mid-term elections, has drawn fierce opposition from the financial sector and its Republican allies as stifling innovation with weighty new rules.

The number two House Republican, Representative Eric Cantor, said the legislation "frightens people and creates uncertainty in the American economy, preventing job growth."

The bill notably tackles the issue of firms deemed "too big to fail," which received hundreds of billions of dollars in US government "bailout" cash because their collapse would have dealt crippling blows to the economy.

The legislation gives regulators the power to dismantle such giants, and lays out a systematic way to unwind them in case of collapse that ensures shareholders and unsecured creditors, not taxpayers, bear the losses.

It also reinforces the powers of the Securities and Exchange Commission to detect irregularities that could provide an early warning of fraudulent investment schemes, like the fraud perpetrated by Wall Street swindler Bernie Madoff.

The measure also includes a first-of-its-kind plan to regulate the vast market in arcane financial products called derivatives.

It would give the Federal Reserve broader powers to oversee large at-risk firms, but also give the Government Accountability Office -- the investigative arm of the US Congress -- more oversight power over the Fed itself.

Amid US public anger at lavish bonuses paid out at firms the government saved from collapse, the measure provides for shareholders to hold non-binding annual votes on executive compensation, including severance packages known as "golden parachutes."

The House and Senate must approve identical legislation in order to send it to Obama to sign into law.

Source: AFP

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