Wall Street Reform: A Summary of What's In the Bill

Updated 4:55 p.m. ET

Here is a summary of the The Wall Street Reform and Consumer Protection Act, the long-awaited financial reform overhaul that passed out of conference committee at 5:39 a.m this morning.

Both the House and Senate are expected to pass the conference report next week so that it is on President Obama's desk by the July 4th recess.

The provisions below are broken into two groups -- those that mainly affect consumers and those that mainly affect financial institutions.

Consumers:

Bureau of Consumer Financial Protection:

House conferees agreed to the Senate language that creates a bureau within the Federal Reserve to regulate consumer financial products like mortgages and credit cards. The bureau would also oversee payday lenders and check cashing businesses. Auto dealers and pawnbrokers are exempt from the bureau's regulation even though the Department of Defense wanted auto dealers included because of past instances of exploiting members of the military. House members originally wanted this watchdog to be a freestanding agency.

The bureau would have broad authority to write new rules for a variety of consumer products. Republicans argue that this is an added layer of regulation that is unnecessary. Opponents also argue that all of the new regulations of lenders would reduce the amount of credit available to consumers.

Credit/debit Card fees:

Sen. Dick Durbin (D-Ill.) championed this provision that would regulate the $20 billion interchange fee system. It would require that the fees banks charge businesses for processing debit card transactions be "reasonable and proportional to the cost incurred in processing the transaction" according to Durbin's summary of the provision. The Federal Reserve would be required to issue new rules on the fees.

This 1-2% fee on the full price of the transaction is why many small retailers don't allow consumers to pay with plastic unless the transaction is over a certain amount. Retailers would be allowed under the bill to offer discounts to use cash. They can still set a minimum purchase amount to use cards, but the Federal Reserve would have the authority to set the minimum. This bill would set the minimum to start at $10.

The bill also only allows the federal government or institutions of higher education to set a maximum amount for acceptance of credit cards.

Mortgages:

Lenders must verify that borrowers are able to repay the loans that they issue. Lenders would pay penalties for irresponsible lending.

The bill would ensure that consumers benefit when refinancing a mortgage. It would eliminate fees -- known as "prepayment penalties" -- for paying off a mortgage early.

Credit Scores:

If a lender refuses an potential borrower's loan, that lender would be required to let the applicant know their credit score for free.

Financial Institutions:

The Power to Unwind:

The FDIC would have the authority to liquidate failing firms while the Treasury Department fronts the money to do so. There would also be a repayment plan so that taxpayers are guaranteed to get the money back.

Financial Stability Oversight Council:

The council would monitor systemic risk across the entire financial system and make recommendations to the Federal Reserve to alleviate that risk. The ten-member council would include the heads of the federal financial agencies.

Fannie/Freddie:

Republicans biggest beef with the whole bill is that it does nothing to address the problems, and sustainability, of mortgage giants Fannie Mae and Freddie Mac.

No Resolution Fund:

The House wanted to create a $150 billion fund to pay for any future bailouts. The fund would be paid for by the banks. This provision was gutted. Conferees agreed that this could only be created after a massive collapse. This is the fund that Republicans successfully painted as a permanent bailout fund when Democrats in the Senate tried to include a similar, but only $50 billion, fund.

Volcker Rule:

Mostly prohibits banks from proprietary trading and investing in private equity firms or hedge funds. Conferees agreed to weaken this by allowing some stronger banks to invest up to three percent of their capital in private equity groups or hedge funds.

Derivatives:

One of the thorniest issues, and the final compromise that led to passage of the conference report, was whether, and how, to allow banks to trade derivatives. Under the agreement, banks would be forced to spinoff some derivative trades to a subsidiary so that they are not in the same pot as federally insured deposits. They would not be allowed to trade in some of the most risky derivatives. Banks could still trade some swaps to legitimately hedge risk. Most swaps would have to be cleared and traded on exchanges.

Credit Rating Agencies:

Credit rating agencies like Moody's, Standard and Poor's and Fitch took a lot of heat after the financial crisis for giving AAA ratings to some of the most toxic mortgage-backed securities. As lawmakers made an effort to understand what led to the 2008 financial crisis, they saw that an inherent conflict of interest since the agencies are paid by the companies for the ratings. Under the conference agreement, there will be a two-year study, but then the SEC must create a board that will assign credit ratings agencies to issuers of asset-backed securities. That's unless the SEC study reveals a better way to eliminate the conflict of interest.

Government Accountability Office Study of the Federal Reserve:

The GAO will be able to do a full audit of the Federal Reserve. This is still a major provision, but conferees did not accept the more strict language in the House bill that would require an audit every year.

Assessments:

Financial firms with over $50 billion in assets and hedge funds with over $10 billion have to pay a fee to pay for the costs of the bill.

Special Deals:

Sen. Scott Brown (R-Mass.), who is expected to be a key swing vote next week in the Senate, got some sweet exemptions for financial firms in the Boston area according to the Boston Globe.

More Coverage:

Congress Agrees on Sweeping Financial Reform
Wall St. Reform Bill Greeted with Skepticism
Jill Schlesinger: What's In It For Consumers?
Obama: Overhaul Has 90% of What I Proposed
Special Section: Wall Street Under Fire

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(CBS)

Jill Jackson is a CBS News Capitol Hill Producer. You can read more of her posts in Hotsheet here. You can also follow her on Twitter.

[mindlesstaxpayer]

The middle to upper class American who works in the financial services industry will no longer be able to earn a living to pay taxes to support the poor people. Congrats Democrats, it will soon become very clear that the Republican theory of trickle down economics is the way to go. The US is a service based economy, combine your reform bill with your health care bill and you've eliminated millions of middle to upper class jobs. How f****** stupid can you be? All in the name of protecting a bunch of free loading, lower class? Canada here I come.

[claydowner]

This Wall Street reform bill is a good solid piece of legislation. It should be tougher but it is tough enough to at least mitigate the worst factors that caused the 2008 Sub-prime mortgage crisis. Banks will only be allowed limited ability to invest in hedge funds and other high risk markets like derivatives. When they do so there will be more regulations and oversight. What should have been done and what was not done is the breaking up of the large banks that form an financial oligarchy over Wall Street. Ultimately all of us little people like me who do our banking in FDIC institutions that did not cause this financial collapse end up subsidizing Wall Street risk while their profits are privatized for the corporate elite. Ultimately, until strong antitrust actions are taken, we will someday again have another Enron, Savings and Loan, or 2008 Sup-prime disaster only in an altered form. I wish pay day lenders who charge poor people 150% or even higher interest would have been wiped from the face of this earth. Every single one of these payday lenders are controlled directly by a large Wall Street banks. These payday lenders exploit the poor so the rich elite on Wall Street can be supported by little people like me. Like the pharaohs looking down upon their slaves from their pyramids, or the feudal lords in their castles looking down upon their serfs working their fields or Wall Street capitalist bankers looking down upon the tired masses slaving below in their corporations, the laws on the books are meant too keep the elite in control and the humble masses enslaved by debt in line and pulling their plow. In an ever changing universe, some things stay an eternal constant.

Take a look at the Canadians up north. The CBC reported that official Canadian government statistics showed Canada produced around 93,000 jobs in June alone. Canada has turned the corner in its recession and now has an unemployment rate of less than 8%. The Canadians properly regulated their banks refusing them to get heavily involved with derivatives, hedge funds, and other highly speculative and volatile markets. Canadian style regulated capitalism beats the supply side American deregulated version of capitalism every business day.

[belingrif]

I work for a payday lender and I do not understand why we were included in this govt bill. In the majority of cases, we operate under rules set by the state. Now we are being double regulated. Pay day lenders did not cause the financial collapse. We are little guys compared to banks and investment firms. We give $200-$500 loans. The cause of the financial collapse was more to do with banks giving $250000 home loans to people that didn't even have to show any documentation that they could pay that loan back.
Especially in times of economic downturn, such as now, I think we should be giving consumers more credit options, not less. Many subprime consumers are finding that they have fewer and fewer choices when in need of immediate credit. While payday loans may not be a long-term solution to their problems, they can help many hardworking people make it through difficult short-term periods or cover emergency expenses that they never saw coming

[stormerF3]

The Politicans(Democrats) want to make the banks pay an extra Tax,when the Banks have paid back with interest the money they borrowed.AIG Fannie Mae and Freddie Mac have not,along with GM and Chrysler. If they pass this worthless reform and Tax the Banks because they are an easy target,guess what, more people will lose their jobs.

[longtree-2009]

Fannie Mae and Freddie Mac must have many of them in their pocket or they have lobbyists who are more powerful than elected officials. thinking corruption is as much a problem here as in third world countries.

[RobAla]

Where are the reforms to the most grievous offenders of the bailouts, Fannie Mae and Freddy Mac? There is nothing in this stupid reform to straighten out these two federal loan agencies. They continue to rob the American people by failing to pay back the bailout money. The banks have faithfully been paying the bailouts back. This reform this pure crap. It is another extension of power of the federal government over our society. Pure and simple. No corporation is too big to fail. That is what our monopoly laws are all about. This is pure crap.

[dronemonk]

By the bankers, for the bankers, of the bankers.