Senate Passes Financial Reform

It's become an afterthought given the debate over illegal immigration but with relatively little fanfare, the Senate passed financial reform yesterday.

The legislation passed the Senate 59 to 39 and must now be reconciled with a similar bill passed by the House of Representatives in December, before it can be sent to President Barack Obama to be signed into law.

The controversial measure, supported by the Obama administration, sets up new regulatory bodies and restricts the actions of banks and other financial firms. It is designed to try to make order of the cascading regulatory chaos that ensued in 2008 when mammoth banks and some unregulated financial firms collapsed, and public funds were used to save them. Among other things, the legislation would:

The legislation creates a consumer financial protection agency, regulates more stiffly derivatives, manages systemic risk, gives the Fed more power, and allows for the federal government to liquidate very large financial firms.

Frankly, no one, especially those that passed it, understands financial reform. It's completely unclear if this bill will help or hurt. Furthermore, the bill is almost fifteen hundred pages long and so who knows what's in the bill.