Late this week or early next week, a Financial Reform Bill summary is due to be debated in the Senate. To get a good idea of the Financial Reform Bill summary that will regulate everything from a payday lender to the biggest banks, it is possible to put together a financial reform bill summary of both HR 4173, the House bill that was passed last December and S 3271, the Senate bill that will debated this week. Keep in mind that this Financial Reform Bill summary could change during reconciliation, though the broad strokes will likely remain the same. This article covers HR 4173, the House Bill. For a full Financial Reform Bill summary of the Senate bill, see Part 2.
Financial Reform Bill Summary | HR 4173
HR 4173 is the House of Representatives Financial Reform Bill. This financial reform bill originated in the House Financial Services Committee and is generally known as the Wall Street Reform and Consumer Protection Act. A full text of HR 4173 is available in PDF form on the U.S. House of representatives website.
Financial Reform Bill HR 4173 summary | Consumer Protections
First, a Consumer Financial Protection Agency is set to be a separate Federal agency focused solely on decoding, regulating, and ensuring the safety of U.S. financial product consumers. The day-to-day functionality of the Consumer Financial Protection Agency might include creating disclosure standards, working for consumer education about personal loan companies, and examining the details of new financial products.
Anti-predatory lending laws and mortgage reform would also be included. A standard that borrowers must be able to repay the loans they are sold would be instituted. The role of credit rating agencies would also be addressed, and credit rating agencies would be given some liability for their ratings.
HR 4173 Financial Reform Bill summary | Stability and Investing
The Financial Stability Council would be an “inter agency council” charged with identifying what financial firms are especially risky. The Securities and Exchange Commission would also be given stronger investor-protection powers.
Financial Reform Bill HR 4173 Summary | Too Big To Fail
Firms that are considered “Too Big To Fail” would no longer be given taxpayer dollars to keep running. Instead, the Financial Reform Bill would create a system for dismantling financial businesses when they start to fail. In short – no more bailouts for big companies.
Summary of HR 4173 | Investors Say on Pay
HR 4173 would give shareholders of a company a “say on pay” of the executives of a company. While the vote would only be advisory, regulators are also given the ability to ban “inappropriate or imprudently risky” pay packages. In other words, no more executives getting paid millions for running their companies into the ground.
HR 4173 Summary | Derivatives
The “derivatives” market would be regulated for the first time ever. A financial derivative is a product developed from another product. For example, the “mortgage-backed securities” were a financial product derived from residential mortgages. Any “derivative” product with “substantial risk” would be monitored.
Financial reform bill summary | Private Pools Investing Money
Hedge funds and private equity firms – the businesses who are in the business of investing with private money – are not currently regulated. Under HR 4173, a “private pool of capital” – a group of people that pool their money to invest it – would be examined for risk by the Financial Stability Council.
Financial reform bill HR 4173 | Office of Insurance
Finally, the Financial Reform Bill HR 4173 would create a unified insurance regulatory agency. Rather than insurance companies being subject to multiple sets of rules, a single Office of Insurance would monitor, regulate, and report on the insurance industry.
This is a summary of the Financial Reform Bill that passed the House of Representatives as HR 4173. See a full summary of Senate bill S 3271 in S 3271 | Financial Reform Bill Summary Part 2