Adds certainty to the markets.
Generally, the stock market doesn't react well to uncertainty. Although changes will still be made to the final bill, there is hope that investors now have a better idea of how
Many of the bill's provisions in the bill could significantly affect the way big banks and other financial services companies do business. Says
It looks as though the federal government is going to be given greater authority to regulate risks in the marketplace--and a lot of that responsibility may fall on the Federal Reserve. The problem is, Barrington says, regulators were supposed to be doing this in the first place. He argues that federal regulators theoretically had oversight powers before the financial crisis occurred. "Like a lot of things, it depends on the implementation," he says. "Does this make consumers safer? It remains to be seen."
During the House-Senate conference, one of the biggest differences in the two bills--whether or not a liquidation fund should be created to safely wind down distressed banks--will be debated. The House bill contains a provision that requires
Regulation of debit card fees.
Consumers may be forced to rethink the way they pay for some purchases because a provision in the bill allows federal regulators to investigate interchange fees--what banks charge retailers to process the transaction--associated with debit cards. It's going to be a battle over who gets a bigger share of the fees. Barrington believes retailers may win the battle, and that could potentially change the way consumers use their debit cards.
The goal is to limit how much profit the banks make in these transactions, and while that seems to be a noble goal, it may backfire for consumers. "If it squeezes banks too much, it could limit the availability of where you can use your debit card in the long run," Barrington says. "If it's not attractive to the bank, then inevitably you'll find fewer places where you can use your debit card." The reason it's become so easy for consumers to use a debit card is that until now, it's been a profitable for banks to invest in and expand that network, Barrington says.
Tightening mortgage standards.
Part of the role of the new consumer protection agency will be to investigate how loans are given to consumers and what reforms need to be made. "This would make credit tougher to get, but I would argue that could be a good thing," Barrington says. "Too much credit got a lot of people and the system in trouble."
The new agency is meant to protect individuals who were being taken advantage of and signing up for mortgages that they couldn't afford. "The mortgage crisis was caused by lenders not paying any attention to whether or not a mortgage was affordable for the consumer," says
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(c) 2010 Sebastian Mallaby