Wall Street banks face their toughest clampdown since the Great Depression after the U.S. Senate passed Barack Obama’s banking reform bill.

In a historic change, the U.S. government will be handed the power to seize control of a failing bank to avoid a collapse that could threaten the financial sector. Derivatives trading will be subject to new controls, and shareholders will get a British-style “say on pay” vote on boardroom bonuses.
However, some measures were dropped from the bill — including stringent conflict-of-interest rules and tighter controls on proprietary trading — after Republicans prevented these topics being voted on. And it remains unclear whether U.S. deposit-taking banks will also be banned from engaging in proprietary trading — buying and selling using their own money rather than their clients’.
The bill aims to reshape Wall Street and prevent a repeat of the turmoil of the last few years. It is the biggest shake-up of the sector since the 1930s. As well as forcing changes on America’s biggest banks, a consumer financial protection bureau will be introduced to police the sale of products such as mortgages and credit cards.
The passage of the bill in the Senate, by 59 votes to 39, is a personal triumph for Obama — who accused the industry of attempting to stifle desperately needed reforms.
“Over the past year, the financial industry has repeatedly tried to end this reform with hordes of lobbyists and millions of dollars of ads. When they couldn’t kill it, they tried to water it down.”
The president said the law would mean an end to state-funded rescues: “Taxpayers will never again be asked to foot the bill for Wall Street’s mistakes. There will be no more taxpayer-funded bailouts. Period.”
Harry Reid, the Democrat majority leader in the Senate, said the reform bill sent a clear message to Wall Street that they could not “recklessly gamble away other people’s money”.
“It says the days of too big to fail are behind us. It says to those who game the system — the game is over,” Reid said.
One of the biggest changes will be that banks will be forced to keep their derivatives-dealing operations separate from their core operation, or divest them altogether. Derivatives trading will also have to take place through a central clearing house.
The Senate bill must now be merged with a measure approved in December by the U.S. House of Representatives, before it goes to the president to be signed into law.
(Source: The Guardian)