Deposit Protection Increase Becomes Permanent. D B
uring the financial crisis the FDIC, which insures bank deposits, temporarily increased the amount they would insure from $100,000 to $250,000 in
FDIC-insured banks. Thus, couples with separate accounts as well as a single joint account could qualify for up to $750,000 worth of protection.
Reducing Risky Business at Banks.
anks will be required to hold additional capital to cover potential losses and some securities are no longer acceptable vehicles for capital reserves held by large banks.
Banks will have to hold5 percent of their loans on their books if the loan is sold or repackaged with other loans or securities. Also banks will have to set up separate operations to handle their most risky derivative trades and will be permitted to invest
no more than 3 percent of its core capital in hedge funds or private equity. Monitoring Future Hazards.
A
new Financial Stability Oversight Council is responsible to assess and manage risks that could threaten the entire
U.S. financial system. This authority includes the ability to fire corporate management responsible for the failure and prohibiting any payment to shareholders until certain other claims are paid. Also the FDIC will oversee the liquidation of a bank whose failure the Treasury Secretary determines would disrupt the stability of the nation’s financial system. “We have an obligation of speed,” Treasury Secretary Timothy F. Geithner said in a speech at New York University. “When the Financial Stability Oversight Council first meets, we will establish an integrated road map for the first stages of reform and put that in the public domain.”
For the Consumer. M
any of the new regulations that directly affect every consumer cover things like how overdrafts are handled on your account – whether you will have money transferred or your bank will cover an ATM overdraft for a fee. On credit cards there are tighter controls on raising interest rates, greater restrictions on service fees, issuing credit cards to students and minors and to extend the period before gift cards expire.
spacecoastbusiness.com OCTOBER2010[45
Transparency and Accountability in Investments and Services.
F
or the person whose financial acumen is limited to mutual funds, IRA’s and a few real estate holdings, the
particulars of certain investment vehicles like “derivatives” and hedge funds are where the world of finance tends to follow the track of theoretical physics or the fictional antics of Dan Aykroyd and Eddie Murphy, staging a financial coup on pork belly futures, in the movie, Trading Places. It is also one of the factors that affect the larger market and so is a concern to investors and government regulators alike. The accountability for these and other forms of invest-
ment has increased. Also, securities based on sub-prime mortgages will be overseen by the Securities and Exchange Commission (SEC).
Credit and Lending Revised. I
n addition to requiring originators of residential mortgages to disclose any conflicts of interest, the lenders are also required to improve their due
diligence in determining the borrower’s ability to repay the loan. This seems especially important since many believe the recent financial debacle can be traced to sub-prime lending encouraged by Fanny Mae and Freddie Mac, which spiked from 10% before 2004to 20% by 2006. Income, credit history and other factors will be more strictly scrutinized, which could have an impact on the self-employed or others whose income isn’t based on a scheduled salary. One of the responses to the current rash of foreclosures is the provision
that allows homeowners – who can’t make their mortgage payments due to job loss or a medical condition – to apply for up to $50,000 in loan assistance through HUD’s Emergency Mortgage Assistance Fund.
Highlights of the Wall Street Reform and Consumer Protection Act
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