Changes to the Finance Reform Bill that Passed last night
July 13th 2010 22:23
With the removal of three major items from the Finance Reform Bill (previously talked about) three Republican Olympia Snow, Republican from Maine, Susan Collins Republican from Maine and Scott Brown Republican from Massachusetts changed their vote so the Finance Reform Bill has passed the Senate. With these changes I believe the bill must go back to the House (or should I say) it is supposed to go back to the House for another vote but the President is hoping to sign it this week so you have to move fast if you want your Congressman to support the bill or to vote No on finance reform. Here is the bill that I found and from skimming through it I do not see that the language has changed. That concerns me as earlier this year Representative Jim Bunning from Kentucky wanted to be assured that there was a way to pay for the extension of unemployment benefits do you remember that? They made a promise to Representative Bunning and then after he voted yes to the measure changed it after the fact. However who knows what they will do this time. The URL for the bill is Really Long Link Please at your leisure (LOL) read the 2000 plus pages.
Basically from what I am hearing and reading the Wall Street Journal, Money magazine and Reuters the following has been removed from the original bill.
Banks were restricted in the bill from investing money in Hedge Funds this has been partially taken out of the bill. The bill states that banks are only allowed to invest 3% of their capital monies in Hedge Funds. Banks are not allowed according to this bill to trade their own accounts but they can trade for clients or their investors.
There are several way banks make money one is loans, another is charging fees for services such as charge for checks, overdrafts or using the ATM. Other method is the investing in Hedge Funds is one of the types of investments banks did regularly now they are limit keep trading the types of derivatives that account of most their business — those related to interest rates and foreign currencies. Proponents of this change argued that those types of derivatives are central to what banks do.
Banks will also be allowed to trade credit default swaps (insurance that pays off if a borrower defaults on a loan) as long as the swaps go through a clearinghouse.
The second change is that the bill lets banks keep most of their derivatives business. Confusing and you wonder what exactly the Derivatives Business is. Derivatives are basically a way of permitting traders to protecting their bets.
Economists feel that 'Hedging' is a good practice. Hedging the bet is a way that banks or companies (like investment companies) protect themselves against strange or unusual events, the fall of a certain company or commodity.
The finance reform bill says that banks need to set aside money to back their investments but wouldn’t that mean they would be investing or loaning less because they need to keep cash on hand. That seems to be counterproductive.
The third key change is that when the congressional budget office scored the bill they stated that it would increase to the federal deficit. Adding to the deficit many of the blue dog democrats and Brown, Snowe and Collins were opposed to so there was a debate and a change that the cost of the bill would be charged to the banks. The tax will be on banks with assets of more than $50 billion and hedge funds with more than $10 billion. These are the secure banks that are stable so taxing them doesn’t seem to be in the best interest of the banking industry. Another problem with this solution is that the government isn’t adding to the deficit which we pay but by taxing the bank the bank is going to transfer that cost to the client that is you and me. So one way or the other we are going to pay. Why does that logic escape people?
References:
Really Long Link
Really Long Link
Really Long Link Really Long Link
How Banks Invest Money | eHow.com Really Long Link
Banks were restricted in the bill from investing money in Hedge Funds this has been partially taken out of the bill. The bill states that banks are only allowed to invest 3% of their capital monies in Hedge Funds. Banks are not allowed according to this bill to trade their own accounts but they can trade for clients or their investors.
There are several way banks make money one is loans, another is charging fees for services such as charge for checks, overdrafts or using the ATM. Other method is the investing in Hedge Funds is one of the types of investments banks did regularly now they are limit keep trading the types of derivatives that account of most their business — those related to interest rates and foreign currencies. Proponents of this change argued that those types of derivatives are central to what banks do.
The second change is that the bill lets banks keep most of their derivatives business. Confusing and you wonder what exactly the Derivatives Business is. Derivatives are basically a way of permitting traders to protecting their bets.
Economists feel that 'Hedging' is a good practice. Hedging the bet is a way that banks or companies (like investment companies) protect themselves against strange or unusual events, the fall of a certain company or commodity.
The finance reform bill says that banks need to set aside money to back their investments but wouldn’t that mean they would be investing or loaning less because they need to keep cash on hand. That seems to be counterproductive.
The third key change is that when the congressional budget office scored the bill they stated that it would increase to the federal deficit. Adding to the deficit many of the blue dog democrats and Brown, Snowe and Collins were opposed to so there was a debate and a change that the cost of the bill would be charged to the banks. The tax will be on banks with assets of more than $50 billion and hedge funds with more than $10 billion. These are the secure banks that are stable so taxing them doesn’t seem to be in the best interest of the banking industry. Another problem with this solution is that the government isn’t adding to the deficit which we pay but by taxing the bank the bank is going to transfer that cost to the client that is you and me. So one way or the other we are going to pay. Why does that logic escape people?
References:
Really Long Link
Really Long Link
Really Long Link Really Long Link
How Banks Invest Money | eHow.com Really Long Link
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