WASHINGTON (AP) - In the end, it's only a beginning.
The far-reaching new banking and consumer protection bill
awaiting President Barack Obama's signature now shifts from the
politicians to the technocrats.
The legislation gives regulators latitude and time to come up
with new rules, requires scores of studies and, in some instances,
depends on international agreements falling into place.
For Wall Street, the next phase represents continuing
uncertainty. It also offers banks and other financial institutions
yet another opportunity to influence and shape the rules that
govern their businesses.
In hailing the bill's passage in the Senate on Thursday,
Treasury Secretary Timothy Geithner acknowledged that implementing
the new law will take time.
"But we are determined to move as quickly as we can to provide
clarity and certainty," he said.
Among the first impacts of the bill, which Obama is expected to
sign as early as Wednesday, will be the immediate creation of a
10-member Financial Stability Oversight Council, a powerful
assembly of regulators chaired by the treasury secretary to keep
watch over the entire financial system.
The Obama administration has one year to create a new Bureau of
Consumer Financial Protection. Congress will keep its eye on that
agency, eager to see whom Obama chooses as its director. The agency
will have vast powers to enforce regulations covering mortgages,
credit cards and other financial products.
One of the candidates often mentioned for the top consumer spot
is Elizabeth Warren, a Harvard Law School professor who was among
the first to suggest the creation of an agency to safeguard
consumers in their financial transactions. Warren heads the
Congressional Oversight Panel, which has been a watchdog over the
Treasury Department's bank bailout fund. Others mentioned include
Michael Barr, an assistant treasury secretary who has been one of
the architects of the administration's regulatory plan.
But while the oversight council and the consumer bureau might
bloom swiftly, other central provisions of the bill will take time,
in some cases years, to take root.
The consumer bureau, for instance, has as long as 30 months
after it is created for its regulations on predatory lending to
take effect. The legislation calls for a two-year study before
regulators write rules on how risk-rating agencies should avoid any
conflict of interest with the firms whose financial products they
The Fed has until April to derive standards to measure the
fairness of fees charged by banks to merchants for customers who
use debit cards. And regulators will have to fine tune the broad
restrictions in the legislation for the complex derivatives market.
Key will be determining what firms and corporations will face new
The U.S. Chamber of Commerce counts more than 350 rules that the
legislation directs regulators to write. Senate Banking Committee
Chairman Christopher Dodd, an author of the bill, says the
legislation gives regulators a specific blueprint to follow.
"This bill directs the regulators to do things," he said in an
interview. "We leave to the regulators how best to achieve the
goals, but the goals are clear. Congress is not a regulator."
In many instances, regulators already have embarked on
rule-writing. The SEC, for instance, has been working on rules that
would impose the same professional standards on stockbrokers and
dealers that are imposed on financial advisers. The legislation
insists that the SEC conduct a study first.
Hailing the bill Thursday, Fed Chairman Ben Bernanke said the
central bank is also ahead of the game, "overhauling its
supervision and regulation of banking organizations."
Regulators also will have to figure out how to implement new
standards for how much capital banks should hold in reserve to
protect against losses. The legislation requires rules in 18
months. But the U.S. is also part of international negotiations on
what global capital standards should be, and those could move more
"I am very confident with the strong hand that this
(legislation) gives us, that we will be able to bring the world
with us," Geithner told reporters Thursday.