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House Passes Landmark Financial Reform Bill

Well that was close. By a vote of 223-202, House lawmakers passed sweeping legislation that significantly increases regulation of the financial services industry. Whether it will succeed in halting the kinds of practices that led to the financial crisis, as its backers claim, is another story. The fight now moves to the Senate, which is set to debate a similar bill.

Treasury Secretary Tim Geithner praised the measure, called the Wall Street Reform and Consumer Protection Protection Act. Said Geithner in a statement:

"Comprehensive reform must establish clear rules of the road with strong enforcement for our nation's financial institutions and markets; end loopholes that allowed big Wall Street firms to escape supervision; make it clear that no firm is 'too big to fail' and provide strong consumer and investor protections for American families."
Here are the bill's key elements:
  • Creates the Consumer Financial Protection Agency, an independent federal body focused on protecting Americans from unfair and abusive financial products and services
  • Forms a council of regulators that identifies systemically risky financial firms, which would be subject to increased oversight, standards and regulation
  • Establishes a process for shutting down large, failing financial institutions
  • Gives shareholders an advisory vote on pay practices, including executive compensation and golden parachutes
  • Authorizes regulators to ban inappropriate or risky compensation practices and requires financial firms to disclose incentive-based comp structures
  • Tightens regulation of over-the-counter derivatives by requiring all standardized swap transactions between dealers and "major swap participants" to be cleared and traded on an exchange or electronic platform
  • Bans a range of predatory lending practices
  • Requires almost all hedge funds to register with the SEC and subjects them to oversight by a systemic risk regulator
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