July 15, 2010

• Senate Passes Financial Reform, Pt.2
     New strong arm and watchdog.

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  With new rules regulating debit card interchange fees and discounts for customers who are willing to switch to a lower cost credit card or cash, banks stand to lose billions of dollars in income. As a result, consumers will most likely see lenders switch income producing focus to other forms of banking such as establishing checking account fees. However, the law provides the regulatory government more authority in overseeing the establishment of new banking, lending, and credit card fees. The creation of the Consumer Protection Agency is aimed at keeping credit cardholders and consumers overall from becoming involved with risky loans and bank practices. The Volcker Rule will be a part of the new legislation which requires financial institutions to restructure their banking divisions by separating consumer banking from their investment banking division. The provision would prohibit banks from using their own money to make trades unrelated to consumer banking. Furthermore, when investing in hedge funds private equity funds, banks will be limited to investing more than 3% of the fund's total worth and 3% of the bank's equity

  The Consumer Protection Agency will have the authority to design and enforce laws that will protect consumers from the predatory practices of the credit card industry, financial trading industry, and banking industry of the past which led to the recent stock market crash. Furthermore, the agency will ensure that all credit cardholders and American consumers are given free access to their credit reports annually. Furthermore, any pre-payment or early pay off of any loan or mortgage will also be banned.

  Government bailouts, such as last year's $700 billion bailout, of any financial institution will be banned. Instead, the government will now be required to develop a plan to dissemble and liquidate large financial corporations. To avoid credit card companies, banks, and other large financial institutions from getting into trouble, these companies will now be required to keep larger reserves on hand for crisis intervention.
  
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