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Senate Passes Sweeping Financial Overhaul

posted on July 16, 2010

Hello, I'm Mark Pearson. U.S. shoppers made fewer trips to the mall last month, prompting concerns over the pace of America's fragile economic recovery.

According to the Commerce Department, retail sales fell 0.5 percent in June, marking the second consecutive monthly decline.

A separate report revealed the Consumer Price Index -- the nation's most closely watched barometer of inflation -- dropped 0.1 percent in June. Economists noted that both reports reflect the impact of lower energy prices.

Inflation was nowhere to be found at the wholesale level either, since the producer price index fell a seasonally adjusted 0.5 percent last month, in its largest decline since February.

But a separate report revealed U.S. companies are preparing for weaker sales in coming months. Inventories in the US rose 0.1 percent in May, from an all-time low established in April.

The need to replenish depleted stockpiles played a significant role in propelling the U.S. out of the economic abyss. And now, nearly two years after the global economy plummeted into recession, federal lawmakers this week approved the largest overhaul of U.S. financial regulations since the Great Depression...

Senate Passes Sweeping Financial Overhaul

The U.S. Senate passed sweeping financial reforms this week with a bill chock-full of regulatory objectives, including:

New federal powers to break up companies that threaten the economy.

Creation of a new consumer protection agency to guard financial transactions.

And fresh Congressional and Federal Reserve oversight into financial markets that previously eluded regulation.

Under the new bill, the government would be authorized to liquidate failing financial institutions and pass the costs onto their surviving peers.

The Dodd-Frank law creates a Consumer Financial Protection Bureau empowered to write and enforce regulations covering mortgages, credit cards, and other financial products. Lenders face new restrictions on the type of mortgages they write and can not be rewarded for steering borrowers to higher cost loans.

According to the bill's proponents, borrowers will be protected from hidden fees and abusive terms, but also will have to provide additional evidence that they have the means to repay their loans. Senate Agriculture Committee Chair Blanche Lincoln wielded significant power during negotiations on the 2,300 page bill.

Lincoln, an Arkansas Democrat, pushed for stricter enforcement of derivatives trading. The final bill provides governmental authority for setting aggregate speculative position limits for market participants AND requires derivatives be traded in clearinghouses. But legitimate end-users of commodities - farms and some businesses that physically acquire commodities - were exempted.

The Commodities Futures Trading Council, or CFTC, and the Securities and Exchange Commission, or SEC, have newfound authority to examine disruptive or manipulative market actions.

The substantial expansion of federal powers made many Republicans uneasy about the final bill but the Senate's 60-38 vote awarded President Obama his biggest legislative victory since sweeping health care reforms in March.

The president is expected to sign the measure into law next week.


Tags: Chris Dodd Congress economy finance government news reform Wall Street