Hailing the new Wall Street reform bill as one that will "empower consumers and investors, bring the shadowy deals that caused this crisis into the light of day, and put a stop to taxpayer bailouts once and for all," President Barack Obama on Wednesday signed into law the nation's broadest financial regulations
since the Great Depression.
In a signing ceremony at the Ronald Reagan Building in Washington, Obama was flanked by Vice President Joe Biden and members of Congress who worked to gain passage of the bill. In particular, the president acknowledged the bill's co-sponsors, Sens. Barney Frank (D-Mass.) and Chris Dodd
(D-Conn.), pausing for a lengthy round of applause from the audience of 400, which included consumer advocates, business leaders, state and local officials, members of Congress "and Americans who will be impacted by reform," according to a White House press release. Obama said Frank and Dodd "have worked day and night to bring about this reform."
The president also took a moment to doff his proverbial hat to Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.), saying, "It wouldn't have happened without them." In recent weeks, the administration has battled rumors of a feud
with House Democrats, who have allegedly said the White House has not been supportive of their legislative efforts on his behalf. If there was any lingering tension, it was not apparent onstage during the signing, as Pelosi was seen mouthing the words "Thank you, Mr. President" as he acknowledged both her and Reid's leadership in passage of the reform measure.
The president also took a moment to thank those in the GOP -- Sens. Olympia Snowe (R-Maine), Scott Brown (R-Mass.) and Susan Collins (R-Maine) -- who voted for the bill: "The three Republican senators
who put partisanship aside, judged this bill on the merits, and voted for reform -- we're grateful to them."
The new law includes the following provisions
Increased federal oversight authority.
The federal government will have new oversight of banks, hedge funds, insurance companies, and even car dealers, in the hope of cracking down on the risks and highly leveraged transactions that defined the financial sector in the decade before the economic crisis. A new 10-member Financial Stability Oversight Council will monitor underlying risks in the system and seize failing banks. Banks will be required to hold more capital against their debt to provide them with a larger safety net if investments go bad.
Create a consumer protection agency.
A new bureau under the Federal Reserve, led by a presidential appointee, will oversee financial products that directly affect consumers -- credit cards, bank fees, mortgages, car loans, pawn brokers -- and weed out predatory practices. Currently, the work of protecting consumers is spread across various bank regulators. Existing regulators would enforce new rules on community banks.
The Volcker Rule.
Named after former Federal Reserve chairman Paul Volcker, this provision would prevent banks from making speculative investments that are not in the interests of their customers. If a bank's deposits are federally insured, it will be restricted from trading for its own benefit.
The reform bill will institute new regulation of derivatives, the risky, intangible financial products that were at the heart of the 2008 financial crisis and caused companies like AIG to lose billions of dollars. Trading of derivatives will now take place in a regulated exchange, and financial institutions will be required to spin off their derivatives divisions from their main operations. In theory, that would keep a few employees trading derivatives, like those in AIG's financial products division, from bringing down entire corporations.
Shareholders of publicly owned companies will now vote on how much to pay their chief executives, though companies can ignore the vote if they choose. The Federal Reserve will also issue non-binding guidelines for executive pay intended to corral the astronomical salaries and competitive environment that could lead Wall Street bankers to take potentially devastating risks. Companies could also ignore those recommendations, but the Fed will now have authority to step in if it sees a situation that is out of control.
Following months of contentious debate
, Wednesday's signing provided a moment for the White House to bask in another major legislative victory
as the president announced, "The fact is, every American -- from Main Street to Wall Street -- has a stake in our financial system. . . . That's why we all stand to gain from these reforms. We all win when investors around the world have confidence in our markets. We all win when shareholders have more power and information. We all win when consumers are protected against abuse. And we all win when folks are rewarded based on how well they perform, not how well they evade accountability."