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Financial Reform: Restoring American Financial Stability Act of 2010 (H.R. 4173)

Passed: House and Senate                              

Signed into law: Wednesday, July 21, 2010

Provides: greater consumer protection and control over lending institutions

Financial Reform became an obvious necessity when the out-of-control housing market bubble burst, with a domino effect on the over-extended financial market. Major profits came out of moving of money rather than through production of goods. Many of the largest financial institutions escaped death only through the $700 billion in TARP funding. 

Usury was rampant, with varieties of “pay-day” loan institutions multiplying daily. Interest rates into the hundreds of percents have been common. The first control was on loans to military personnel, holding the rate to 36%, which is what has always been allowed for credit union loans and credit card interest. This seems to be sufficient, as credit unions have not required bail-outs. 

Under this new law, large banks will have a new overseer agency within the Federal Reserve, and new guidelines will be devised. The bill is very large, attempting to prevent as many loopholes as could be foreseen.

Among other things, the bill:

Holds accountable all entities providing loans, with the exception of auto dealers and a few others

Requires large financial institutions to hold larger reserves to cover potential losses to prevent taxpayer money being used to “bail them out”

Eliminates loopholes that allow risky and abusive practices to go on unnoticed and unregulated - including loopholes for over-the-counter derivatives, asset-backed securities, hedge funds, mortgage brokers and payday lenders

Streamlines bank supervision to create clarity and accountability and protects the dual banking system that supports community banks

Provides shareholders with a say on pay and corporate affairs with a nonbinding vote on executive compensation

Provides tough new rules for transparency and accountability for credit rating agencies to protect investors and businesses

Strengthens oversight and empowers regulators to aggressively pursue financial fraud.