The Philippine Online Chronicles

US President Barack Obama on Wednesday signed a landmark piece of legislation for the country's finances, making Wall Street accountable for its actions and ending taxpayer bailouts.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, legislators aim to make consumers more protected, end "too big to fail bailouts," and set protocols in place that will stabilize the economy and eliminate "exotic instruments" or loopholes that allow risky and abusive practices.

Banks are no longer allowed to own, invest or sponsor hedge funds, private equity funds or proprietary trading operations for their own profit. The growth of large financial firms will also be controlled, their risky financial activities constrained. "There will be a mechanism," the US government said, "for the government to shut down failing financial companies without precipitating a financial panic that leaves taxpayers and small businesses on the hook."

The law also creates an independent bureau, housed at the Federal Reserve, which will be in charge of consumer protection. Among the bureau's duties will be to provide ongoing federal oversight of both nonbank companies and banks in the mortgage market. This will be to "protect borrowers from unfair, deceptive or other illegal mortgage lending practices," according to the White House website.

The bureau will also enforce a new credit-card law banning rate hikes on existing balances, and new rules allowing consumers to decide whether to join expensive overdraft programs to avoid being unknowingly charged unnecessary fees.

The Federal Reserve will also be reformed, and its policies revised. (More details here.)

"While a number of factors led to such a severe recession, the primary cause was a breakdown in our financial system. It was a crisis born of a failure of responsibility from certain corners of Wall Street to the halls of power in Washington," Obama said during the signing of the law.

"The financial industry is central to [America's] ability to grow, to prosper, to compete and to innovate. [This reform] is designed to make sure that everybody follows the same set of rules, so that firms compete on price and quality, not on tricks and not on traps."

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