STEVE INSKEEP, host:
It's MORNING EDITION from NPR News. Good morning. I'm Steve Inskeep.
President Obama is on his way to Toronto to attend an economic summit of world leaders. Before leaving Washington, the president praised lawmakers, who reached an agreement early this morning to overhaul rules regulating Wall Street.
President BARACK OBAMA: We are poised to pass the toughest financial reforms since the ones we created in the aftermath of the Great Depression.
INSKEEP: That's the president speaking earlier this morning. He says the measure, which was forged after the financial meltdown, of course, should help avoid a future disaster.
This bill puts tighter regulation on financial institutions, we're told, and as well as regulations on the products they sell. It creates a powerful new agency to protect consumers.
Lawmakers hope the House and Senate will approve it by July 4, after they've spent 21 hours overnight trying to come to an agreement. In fact, the bill's sponsors, Chris Dodd and Barney Frank, were still at work early this morning and joking about how the day was only just beginning.
Senator CHRIS DODD (Democrat, Connecticut): Senate staff will be at their desk at 8:30 this morning.
(Soundbite of laughter)
Representative BARNEY FRANK (Democrat, Massachusetts): Having slept there for the past couple of hours.
INSKEEP: NPR's John Ydstie was monitoring the hearings last night and has this report.
John, good morning.
JOHN YDSTIE: One of the sticking points was the Volcker rule, which puts limits on the ability of banks to take risks with their own money in financial markets. The banks fought hard to kill it, but succeeded only eroding it a bit. They won't be able to trade with their own money, but they could invest limited amounts of their own money in hedge funds and private equity funds.
INSKEEP: I want to make sure I understand the legislative process here. Just talk me through this and tell me if I get something wrong. Is it correct that both the House and the Senate have passed financial regulation changes and what we were seeing here is a conference committee, right?
YDSTIE: That's right. They were putting the two bills together. They've succeeded in doing that and they'll go back to each house for a vote.
INSKEEP: And you're saying that in that negotiating, the banks were not able to kill this proposal that they didn't like? The banks lost. But were there other ways that the banks were able to avoid restricting their powers?
YDSTIE: Well, you know, they tried again with this provision on derivatives. They wanted to - the proposal was to ban their trading of derivatives. Again, they weren't able to kill it but only succeeded in eroding it a bit.
INSKEEP: So what do consumer advocates think of this bill, John Ydstie?
YDSTIE: Well, consumer advocates think it's a massive victory. For them the crown jewel is the Consumer Financial Protection Bureau, which will be housed at the Federal Reserve but be independent in all other ways. It'll have the ability to write rules and enforce them on home mortgages and payday lenders and credit cards. It has very broad powers and will really be the strongest consumer protection institution ever.
One regret that the consumer advocates have is that the car dealers managed to get themselves exempted from oversight by this new consumer bureau. But the Federal Trade Commission did get some new powers to oversee auto loans.
INSKEEP: John, a couple of other quick questions very quickly I want to get to here. The first question on a lot of people's minds is whether people are going to be spending billions or trillions of dollars bailing out banks in the future.
YDSTIE: Well, this bill gives the government new powers to seize failing financial institutions and sell them off. Shareholders and creditors would bear the losses if more money was needed to wind them down. And banks would be taxed to pay for the wind-down after the fact if more money is needed, not taxpayers.
And this legislation also contains an early warning system to try to predict and prevent the next crisis. We don't know if that'll work until the next crisis. But the Democrats in Congress and the administration are calling this a historic victory. Every Democrat on the conference committee voted for the bill.
The Republicans don't see it that way.
INSKEEP: That was my other question. Yes.
YDSTIE: There was not one Republican vote on this legislation.
INSKEEP: Not one Republican vote? Does that mean that it can easily, though, get through the Senate?
YDSTIE: You know, my understanding is that it has been negotiated to get those 60 votes in the Senate that it needs. I guess we'll see next week, but I doubt that it would have come out of conference committee without those 60 votes assured.
INSKEEP: John, thanks very much.
YDSTIE: You're welcome, Steve.
INSKEEP: That's NPR's John Ydstie, who's been monitoring the overhaul of financial regulations.
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