Wall Street under control: a new era in finance?

The new financial rules of the United States has lead to an agreement between the Senators and Representatives of Congress. Since the regulations of 1933 and 1934 following the stock market crash of 1929, is a fundamental transformation of the financial landscape that we will see. At the inability of financial self-regulation, the U.S. legislator has developed a regulation of about 2000 pages that concern all aspects of finance.

The fact that there is a political agreement between Democrats and Republicans on this project is remarkable in itself: Wall Street was generally almost unqualified support among Republicans. It is public opinion that made the difference. The abuses of funds have indeed had a real effect on the average American: Increased levels of funding for their homes, property market declines, loss of housing, massive job. Many of them have more been able to financial studies of their children.

Even though Wall Street is not responsible for the economic crisis, it al’affaiblie and worsened the financial health of contractors and consumers. It became impossible for Republicans to openly support the banks. The arrogance of Goldman Sachs, and Madoff bonuses paid by banks that the taxpayer owed their salvation did the rest.The new legislation modifies substantially U.S. financial landscape.

• The creation of a council that will bring together leading regulators and the Federal Reserve is expected to better anticipate crises and their consequences.
• The most significant victory was not to allow banks to use their own funds for speculative purposes. Hedge funds are strictly limited internal, and in many cases speculative transactions will be conducted outside the bank, which specialized subsidiaries in the explosion will not banking themselves. Known as the failure of “Volker Rule” named after the former president of the Federal Reserve, it no longer allows banks to take their banking business as a hostage of their speculation. JP Morgan had the gall to announce two days before the redemption of a hedge fund in Brazil: This operation can be realized. Entries will not be in the minority.
• Regarding derivatives, the market structure will evolve towards greater transparency: for maintaining unnecessary features, a form of standardization will be established and transactions will take place on regulated markets, mainly grants. This transparency will also measure the dangers.
• An initiative that took to heart President Obama has endured in this power struggle: the creation of an agency that will serve to regulate and enforce strict rules to put an end to what must be considered a form of harassment of consumers. It was the bane of Republicans: the recent abuses of the banks have made any opposition futile.
• On the size of the institutions (“too big to fail”), it is through that regulators will follow the evolution of the size and risky banks. Banks will contribute up to 20 billion dollars to create a mechanism to intervene in time, without having to call the taxpayer.
• As banks continue to develop and sell products or securities structures of financial assets, they will require to keep their balance sheets at least 5% of these assets: this will provide a defense against an attitude of trying to sell n ‘ Anything with a favorable rating implications for issuers. This legislation is a victory for President Obama.

It is not perfect. As for health care, the government had to accept major concessions to secure the necessary political consensus. Banks and other financial institutions have waged a battle inch by inch, and spent over one million per day to influence the U.S. administration.Even if the legislation covers only the U.S., the new rules begin to be clear and influence the world.

Globally, the negotiations taking place in Basel in the “Basle Committee” of the Bank for International Settlements progressing and rules arising from it will be needed well beyond the United States: what are the rules that will require the global banking system more strength to face the greatest risks and hedge walls to prevent the liquidity crisis of recent years.

Europe has long claimed that American regulations: for the G-20 Toronto, the United States may report their ability to reform Wall Street. Faced with this realization, the question that U.S. negotiators will ask is whether or is Europe. Weakened by the crisis of the euro and the lack of progress in regulatory reform, the EU delegation would not be in a position of strength. In his own garden that Europe must now intervene.

Faced with Act II of the financial crisis will be the management of public deficits, the fact that financial institutions will be closely monitored is clearly an improvement. But we are not yet out of the woods, although a significant step has been taken in the night from Thursday to Friday in Washington.

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