A Senate committee approved Wednesday, the last part of sweeping legislation - a new and strict supervision of the disturbance and the unregulated market for complex financial derivatives. This is one of three important provisions that interfere with the Wall Street Journal.
Also drawing fire from business group’s large financial institutions and proposed by the Agency in order to protect the consumer in the financial markets and fund $ 50 billion, paid in advance by the industry to help cover the cost of government should confiscate and destroy large financial companies, because companies will endanger future economic failures.
Senate Agriculture approved the repair at the White House and Democratic allies are prepared to place an important voice in a few days at the whole package of reforms to be debated in the full Senate. House passed legislation in December of the same.
Obama has tried to ratchet public opinion that supports reining in Wall Street those financial companies to recover more quickly than a deep recession in the country. But reflecting optimism on Capitol Hill in the bipartisan agreement, the presidential race to his rhetoric of Wall Street on Wednesday, anti.
"We must have a developed financial sector, Obama said in an interview on CNBC." But we also have a basic code of the road in place to ensure that investors, consumers, shareholders, global protection against abuse. “
However, Wall Street actively fought against the law. Here is a look at three main areas of dispute.
Tough derivative control
Derivatives get their name because they get value from something else, like interest rates, exchange rates, mortgage or corn or oil prices.
Credit default swaps and other derivatives are complex business contracts, which usually serve as insurance against future market conditions. An airline is concerned that fuel prices and worries about rising interest rates banks could buy derivatives to protect against these events.
However, derivatives used to bet on market performance or the assets, and that's where the violation occurred almost fell of the world economy. Proponents said the tough new rules that this transaction is a game with high stakes on the black market, which, as a major financial casino, which is not regulated, are active.
Derivatives are tools that a business was born in 2000, when Congress has been released with the law, mostly from federal oversight. Explode with the increase in the property market in the use of derivatives, from about 95 billion U.S. dollars in 2000 to 600 billion U.S. dollars this year.
If the housing bubbles, mortgage-linked derivatives market appears to him. Among Wall Street firms American International Group Inc., the rescue operation because they can not be billions of dollars of credit default swaps would have been written for mortgage insurance in connection with investments obsolete.
In addition, the regulator is not known, widespread exposure on derivatives from AIG and other companies. Although some derivatives that are traded on stock exchanges, usually voluntary, at least, without the price and trading volume in the dark.
"We must improve the transparency and accountability in the marketplace," said President of the Senate Agriculture Committee Blanche Lincoln (D-Ark.) shortly before his panel votes 13-8 to approve a new regulation derivative. Committee on Agriculture has oversight for derivatives play an important role in agriculture.
Repair Act would require around 90% of all derivatives traded on regulated markets and central clearing organization. This process ensures there are enough reserves to handle the money and give details about the contract and the price, hence more difficult to defraud investors.
But believe Wall Street firms and businesses that proposed restrictions, which contains a narrow exception to strong and will only increase the price of the product, at a cost to consumers. Rules can also help to promote the derivatives business in countries with less regulation.
Banks like Goldman Sachs Group Inc., JPMorgan Chase & Co. and Bank of America Corp., a large company and the derivative will be a big loser if the new rules come into force. The Senate proposal to the bank to spin off derivative activities for children.
These and other companies involved in the derivatives market, which facilitates further restrictions, and a lot of people. However, last week Obama said he would veto if it is not difficult to review derivative.
Sub-prime crisis in the majority of bank loans and mortgage-brokers from steering people at risk in the belief that house prices will continue to rise. They mortgages - including supreme, interest-only loans and variable rate - Taking advantage of consumers who do not understand the product or they take risks.
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