Reuters | Thu Jul 22, 2010 | 2:29am IST
President Barack Obama signed into law on Wednesday the most comprehensive financial regulatory overhaul since the Great Depression, vowing to stop risky behavior on Wall Street that imperiled the U.S. economy. Influential business groups lined up to criticize the new law, underscoring Obama’s uneasy relationship with America’s business community. Some on Wall Street, however, welcomed the clarity offered by the law after months of wrangling in Congress over what should be in the legislation. The law, which got final approval from the Senate last week, targets the kind of Wall Street risk-taking that helped trigger a global financial meltdown in 2007-2009 and also aims to strengthen consumer protections. Obama, facing voter unrest over Wall Street bailouts that have failed to spark a strong Main Street job recovery, pledged taxpayers would never again have to pump billions of dollars into failing firms to protect the economy. "There will be no more taxpayer-funded bailouts. Period" said Obama.
With Republicans poised to make gains in the November congressional elections, Obama’s Democrats are eager to show voters that they have taken steps to tame an industry that dragged the economy into its deepest recession in 70 years. Obama and Democrats have yet to gain political traction from the legislative victory, with Americans still anxious about a 9.5 percent jobless rate and ballooning deficits. The financial regulatory reforms were a major achievement for Obama and his ambitious domestic agenda. Earlier this year he signed into law sweeping reforms of the United States’ $2.5 trillion healthcare system. The financial reforms won Democrats few friends on Wall Street. Wealthy donors have started to steer more campaign contributions to Republicans, who voted overwhelmingly against the reforms.
Obama had harsh words for "unscrupulous" lenders and others he said had taken risks that endangered the economy. He said the new law was aimed at curbing abuses and excesses on Wall Street and stopping taxpayer bailouts of failing companies. The law would provide certainty "to everybody from bankers to farmers to business owners. And unless your business model depends on cutting corners or bilking your customers, you have nothing to fear from this reform," Obama said. The U.S. Chamber of Commerce, an influential business group that often
criticizes Obama’s economic policies, said it would have the opposite effect. "Such a broad, sweeping bill epitomizes a law with unintended consequences that creates more uncertainty for American businesses," said Thomas J. Donohue, president and CEO of the Chamber. The American Bankers Association expressed disappointment with the legislation, saying it "contains a tsunami of new rules and restrictions for traditional banks that had nothing to do with causing the financial crisis in the first place." Much of its impact will depend on how it is put into practice. Bart Chilton, a commissioner with the U.S. Commodity Futures Trading Commission, said the law boosts transparency and gives regulators better tools to regulate markets, but many questions remained to be answered. "This is a wide-ranging bill with many facets, hundreds where regulators still need to put some more meat on the bones. How we do that, and when we do that, are questions that will really tell if this legislation meets the expectations of its supporters," he said.
Ruth Porat, chief financial officer of financial giant Morgan Stanley, which on Wednesday reported higher-than-expected second quarter profits, said the company was pleased to see the bill signed as it put "some clarity around the issues." The legislation targets potentially lucrative trading in risky over-the-counter derivatives and aims to force banks to end trading for their own profits. It creates a Bureau of Consumer Financial Protection to regulate products ranging from credit cards to mortgages. The administration considered this one of the most critical parts of the bill but banks fought it bitterly. Obama received repeated ovations during his speech and one round of applause was reserved for his praise of three Republican lawmakers who broke ranks with their party to vote for the legislation. The White House said Citigroup Inc.’s CEO Vikram Pandit; Bob Diamond, president of Barclays Plc.; and Gerald Hassell, president of Bank of New York Mellon, attended the bill-signing.
JPMorgan Chase & Co Chief Executive Jamie Dimon was one of the few major bank heads not invited, a spokeswoman for the second-largest U.S. bank said. Dimon once enjoyed a close relationship with Obama, but he later emerged as a vocal critic of the efforts to reform the U.S. banking industry. The White House dismissed as a "fake controversy" media reports on the failure to invite business leaders like Dimon. "The CEOs who opposed reform never expected to be invited to the bill signing and not a single one has complained to the Administration," White House spokesman Jen Psaki said.