By Carter Dougherty - 05/24/10 10:43 AM EDT
The worst financial crisis since the Great Depression has discredited the nation’s banks to the point where they lost their ability to ride herd on the political process. The bankers are not the ventriloquists operating their congressional dummies.
In other words, Wall Street is in retreat.
A Senate that might have taken the edge off the House legislation instead ended up writing a much tougher bill — the two bills are compared below — in a development that has scrambled every prior political calculation about what can and cannot make its way into a financial regulatory reform package.
Carter Dougherty is a Washington-based writer specializing in financial/economic issues, and a blogger for BNET, part of CBS Interactive.
UPDATED: July 13, 2010 4:35 PM
•Derivatives. The Senate bill contains language pushed by Sen. Blanche Lincoln (D-Ark.) that would force banks to spin off their derivatives businesses into separate business entities. It also pushes most derivatives trading on to public exchanges and subjects them to federal regulation.
• Volcker Rule. The Senate bill prohibits banks from engaging in proprietary trading (speculation with their own money) but gives federal agencies latitude to make exemptions, a loophole some senators tried to kill.
• Federal Reserve. Senate avoids the tough House language but does include a provision for examining the Fed’s work during the financial crisis of the last three years.
• Consumer Financial Protection Agency. Senate places the agency inside the Fed with a presidentially-appointed head.
• Car loans. Senate bill does not exempt car loans from the agency’s remit, but conferees may head into the committee having been explicitly instructed to do so in a vote Monday.
• Derivatives. The House bill contains no language similar to Lincoln provision in Senate bill. Instead, it allows banks to retain their derivatives businesses, but pushes most derivatives trading on to public exchanges and subjects them to federal regulation.
• Volcker Rule. House did not pass it but the White House only pushed it after the House voted.
• Federal Reserve. Subjects the Fed to an extensive audit that includes its conduct of monetary policy, something anathema to traditionalists.
• Consumer Financial Protection Agency. Includes an independent agency.
• Car loans. House bill exempts car loans from the agency’s purview.