RESHAPING WALL STREET

RESHAPING WALL STREET
It is the first big test of US President Barack Obamas plans to rein in the excesses of a seemingly unrepentant Wall Street.And the most sweeping overhaul of financial regulation since the Great Depression may not clear its first hurdle in the Senate on Monday,as Republicans held out for a bipartisan deal.Obama and the Democrats need at least one Republican to side with them in a procedural vote in order to begin debate in the Senate.

Game-Changing PROPOSALS



PREVENTING MORE BAILOUTS


Squash the idea that some financial firms are too big to fail.Prevent future bailouts like AIGs.Seek middle ground between bailout and bankruptcy through orderly liquidation process.

PROTECTING CONSUMERS


Stop abusive home mortgages,credit cards.Senate bill creates Financial Consumer Protection Bureau inside Federal Reserve.

VOLCKER RULE


Ban risky proprietary trading,unrelated to customers' needs,at banks with cost-of-capital advantage gained from taxpayer-funded bailout.

OVER-THE-COUNTER DERIVATIVES


Police $450-trillion OTC derivatives market.A hothouse for risk during boom years,it amplified the financial crisis.Obama wants OTC trading through exchanges to boost transparency,risk comprehension and price competition.

SYSTEMIC RISK


Create new entity to spot and head off next crisis.Senate bill sets up nine-member council of regulators,chaired by the Treasury Secretary.

POLICING BANKS


Rationalise bank supervision system to stop problems from festering in the cracks.Fed to keep oversight of bank holding companies with assets over $50 billion.But Fed would lose power over state banks with less than $50 billion in assets.

REGULATING HEDGE FUNDS


Hedge funds must register with government,opening their books to more scrutiny,but Senate bill exempts venture capital funds and PE funds.

FIXING SECURITISATION


Make securitisation market more transparent and accountable.Bill forces securitisers to keep baseline 5% of credit risk on securitised assets.

EXECUTIVE PAY & SHAREHOLDER RIGHTS


Give shareholders more say on executive pay and more clout in electing directors.

CRACKDOWN ON RATING AGENCIES


Boost SEC's power over credit rating agencies.Senate bill also seeks to curb use of unneeded ratings,and exposes raters to more legal risk.

Come clean on OTC deals

IF BANKERS FEEL THERES no fun left in Manhattan,they will move to London or Singapore.A slew of stifling regulations may only fatten other financial centres.As long as there is no limit on the money that central banks can create,financial markets will move from one bubble to another.Capping salaries of bankers may be the easiest to achieve,but will serve very little.Separating safer businesses like deposit taking from riskier ones like derivatives would question the very existence of modern banks that depend on low-cost deposits to cut aggressive deals.What can help,but only a little,is to make banks and hedge funds report their over-thecounter derivative deals and spell out how much of these are collateralised.That could be a rough and ready way to figure out the degree of risk.