Financial firms in US face uncertainty
By Karey Wutkowski |
June 29, 2010, Tuesday
|
Print Edition
Print Edition
UNITED States financial firms are headed into a two-year limbo period as regulators fill in the blanks left in the massive reform legislation, St Louis Federal Reserve Bank President James Bullard said.
Bullard said now obscure provisions could end up hitting Wall Street firms the hardest, and other ones may never get picked up.
The banks just won't know until regulators start putting pen to paper, he said.
"I think we're in for a long period of maybe up to two years where everyone's going to be very anxious to find out how things are going to be interpreted exactly," Bullard told Reuters in an interview.
As an example, Bullard cited the Federal Reserve Act, the 1913 law that created the central bank system. It has been subject to multiple interpretations over decades, giving the Fed latitude to redefine its role.
Early last Friday, lawmakers reached agreement on the financial reform bill after a marathon 21-hour negotiating session. The House of Representatives and Senate are expected to finalize the bill as early as this week, with hopes of President Barack Obama signing it into law by Sunday.
Bullard gained some attention late in the reform process when he backed a provision from Democratic Senator Blanche Lincoln that would force banks to spin off their swaps dealing desks.
Federal Reserve Chairman Ben Bernanke had expressed reservations about the proposal.
The so-called Lincoln provision and the Volcker rule that would limit banks' proprietary trading were promoted by lawmakers as ways to reduce the chance of another deep financial crisis.
Bullard said now obscure provisions could end up hitting Wall Street firms the hardest, and other ones may never get picked up.
The banks just won't know until regulators start putting pen to paper, he said.
"I think we're in for a long period of maybe up to two years where everyone's going to be very anxious to find out how things are going to be interpreted exactly," Bullard told Reuters in an interview.
As an example, Bullard cited the Federal Reserve Act, the 1913 law that created the central bank system. It has been subject to multiple interpretations over decades, giving the Fed latitude to redefine its role.
Early last Friday, lawmakers reached agreement on the financial reform bill after a marathon 21-hour negotiating session. The House of Representatives and Senate are expected to finalize the bill as early as this week, with hopes of President Barack Obama signing it into law by Sunday.
Bullard gained some attention late in the reform process when he backed a provision from Democratic Senator Blanche Lincoln that would force banks to spin off their swaps dealing desks.
Federal Reserve Chairman Ben Bernanke had expressed reservations about the proposal.
The so-called Lincoln provision and the Volcker rule that would limit banks' proprietary trading were promoted by lawmakers as ways to reduce the chance of another deep financial crisis.
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