It is not enough to provide bonuses for Wall Street back on track

It is not enough to provide bonuses for Wall Street back on track. In the meantime the "comprehensive" reform called their wishes by Gordon Brown and Nicolas Sarkozy, American Parliament crossed, this weekend, a major step. At the end of months of negotiations, the House of representatives adopted Friday at a majority of 223 votes against 202, the Wall Street Reform and Consumer Protection Act, aimed at strengthening the financial control of American banks. In addition to the creation of a new agency responsible for the protection of consumers against abusive practices, the Bill provides for the creation of a "Federal regulators Council" chaired by the Secretary to the Treasury and to oversee the "systemic risk", over the heads of the Federal Reserve (Fed).Again, however, the text should be adjusted with the significantly divergent project of the Senate, the vote is not scheduled before the first quarter of 2010.

Differences with the Senate

"The crisis which we are still emerging was born of the failures of Wall Street, but Washington also", noted Barack Obama, by inviting Congress to act more quickly. "We have the responsibility to draw the consequences and to implement the reforms that promote strong investment and encourage real competition and innovation by avoiding the repetition of such crise."Main innovation of the text of the House: the creation of a new unique consumer protection agency, intended by the White House, which will be responsible for the supervision of all financial products, including credit cards and mortgage. The reform also provides for the institution of the Council of the Federal regulators to impose new prudential rules for institutions with systemic risk, with implementation of a 150milliards $ (financed by the sector) Fund to manage the possible dissolution of an institution deemed too risky.

If the Fed keeps a part of his role as systemic regulator that wanted to see assign the White House and Treasury in their draft in June, it is strictly box. All by removing the Central Bank's role of consumer protection, reform governs its status as "lender of last resort" which allows him to lend directly to businesses in exceptional conditions. It also imposes a ceiling of 4 $ 000milliards on its "emergency loans" and authorizes audits of its monetary poli-tick and its interventions by the Congress. Although the House has not, unlike the Senate, to withdraw from the Fed's banking supervisory authority, the text leads to significantly trim his skills. In a recent open letter, some 170 American economists have expressed their concern about this potential relitigation of the independence of the Fed in its conduct of monetary policy.

Among other leading measures, the text of the House provides a regulatory framework specific to unlisted derivatives (OTC) market, in large part to the source of the frustration of AIG and Lehman Brothers. Standardized products will be forced to pass through clearing houses closely monitored by the systemic regulator. It also provides for the compulsory registration of hedge funds with the SEC. However, the text is relatively harmless on the control of the bonus by simply to give voting rights to shareholders on remuneration and loading regulators discouraging practices "inappropriate or overly risky."

"We send a clear message to Wall Street: the party is over", concluded the President of the House, Nancy Pelosi. But the differences that remain between Democratic Senator Christopher Dodd and Barney Frank, the Chairman of the Committee on financial services of the House and principal architect of the project, may still slow down the adoption of the final reform.