| 11 December 2009

In what has affectionately become known "Regulator Fridays" around the BNB garage we have late-breaking news today that does not disappoint. The House just passed the Wall Street Reform and Consumer Protection Act.

The House voted 223 to 202 to approve the measure, and not a single Republican voted in favor of the act. Whether the Act becomes legislation remains to be seen. The Senate is working on its own version.

Republican's were quick to share some very short-sighted comments. "This bill will have severe negative consequences on our financial sector and economy as whole," said Representative Leonard Lance, Republican of New Jersey.

We invite you to tell that to Madoff victims, Sir. You know the ones; they lost their retirement savings due to lack of oversight and now can't get coverage because the SIPC claims that "feeder funds don't count."

You can see the entire Act here if you want. But we'll hit you with a couple interesting highlights:

Swaps would be registered, regulated and would trade on an exchange. There would be no bailouts for failing institutions. "If financial assistance is necessary for orderly dissolution, industry will pay for it." There would be plenty of new rules on compensation -- especially on disclosure of inventive-based compensation. Hedge funds would be regulated more like broker/dealers.

If put into law the Act would form the Consumer Financial Protection Agency, or CFPA. Interestingly, all mention of FINRA was pulled from the Act, and the firm's role is to be reviewed in 2010. It was a controversial move that is already making waves in the industry, but we agree with the move. The Act doubled the budget of the SEC and would enhance the power of State securities regulators.

The SIPC got a fair share of attention in the Act. They would get more funding, more borrowing capacity, an increase in minimum assessments paid and coverage for futures products. These are very important moves and help make the SIPC as important and helpful as the FDIC -- something we've ranted about recently since the SIPC designated trustee for Madoff has decided most cases won't be covered.