Wall Street Overhaul Bill Awaits Obama's Signature
RENEE MONTAGNE, Host:
This is MORNING EDITION from NPR News. I'm Renee Montagne.
MARY LOUISE KELLY, Host:
Yesterday, the Senate passed a 2,315-page bill. It's the most sweeping rewrite of finance rules in decades. President Obama said the financial crisis underscored the need for this kind of reform.
BARACK OBAMA: Reform that will protect consumers when they take out a mortgage or sign up for a credit card, reform that will prevent the kind of shadowy deals that led to this crisis, reform that would never again put taxpayers on the hook for Wall Street's mistakes.
LOUISE KELLY: Well, to find out whether the new rules can do all these things, we've called David Wessel. He's economics editor of the Wall Street Journal and our frequent guest on MORNING EDITION. Good morning, David.
DAVID WESSEL: Good morning.
LOUISE KELLY: Let me start with this claim, that this legislation is going to put an end to big taxpayer bailouts. Is that really the case?
WESSEL: Well, we sure hope so, but I think the short answer is no. The bill, if it's successful, will make it less likely that the banks will get into trouble and it will give the government better tools to deal with them if they do get into trouble, but this is kind of like setting up some new air traffic control system - we're going to have to wait and see whether it actually does all the things that are promised. So, that's the hope, but we don't really know if it's the reality.
LOUISE KELLY: Well, walk us through. In a piece of legislation this big, I assume we're going to see certain changes that take effect immediately, others that are going to take a little bit longer.
WESSEL: Well that's right. I mean, the most important immediate effect is that once the president signs the law, The Treasury and the Fed will have tools to deal with the collapse of a big financial institution, that they didn't have when they were dealing with Bear Stearns, AIG and Lehman Brothers. And that is really important. But a lot of these things will take a long time to work out. Davis Polk, a law firm, says there are at least 243 new federal rulemakings on the way, as a result of this law. The Commodity Futures Trading Commission, has 30 teams working on executing it; we're a year away from creating the new consumer finance agency; and some of the new rules on banks - well, they're not going to take effect 'til 2011, 2012, maybe even 2013.
LOUISE KELLY: Now, what about, for consumers, what are the key changes that we're going to see?
WESSEL: The Fed has power to set fees on things like how much the merchants can take out when you use a debit card. I think, basically, though, we know that when banks are told they can't make money in one place, they're going to try and make it somewhere else. Jamie Diamond, the head of JPMorgan Chase said, just yesterday, if you're a restaurant and you can't charge for the soda, you're going to charge more for the burger. So, that probably means checking account fees will go up, and other things, as banks try to keep up their profits when they are banned from doing certain things by the new law.
LOUISE KELLY: Okay, so now that this is finally headed to the president's desk, take a step back with me, and let's look at the big picture. I mean, the argument from Democrats has been that this will cut the odds of another financial crisis. How much power will it actually have to do that?
WESSEL: It'll have quite a bit of power. It doesn't bust up the big banks, it doesn't cure human nature, it doesn't allow - it doesn't make regulators so smart that they can see around the corner; but it does provide a framework for doing a better surveillance of the financial system. And it does repair the holes that were exposed during the crisis, where the regulators and the supervisors saw things and they really were powerless to do something about them.
LOUISE KELLY: And, where the process goes now, is federal regulatory agencies will start looking at this, figuring out how to interpret it, how strictly it'll be enforced - I mean, there's still a lot to shake out in terms of seeing how this landscape will ultimately look like.
WESSEL: That's right. The irony here is that the regulators, some of them the same individuals who failed to avoid the crisis, are now charged with trying to figure out how to avoid a repeat. And that's made people very skeptical, but I'm not sure we have a whole lot of alternative. If Congress had written a lot of very specific rules, business would've had an easy time doing end runs around them - that's what they always do.
LOUISE KELLY: Okay. David, thanks so much.
WESSEL: You're welcome.
LOUISE KELLY: That's David Wessel, he's economics editor of the Wall Street Journal.
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