I can't claim credit for this. This originally appeared as part of a slideshow on the Huffington Post, but since the text was so much more valuable (and well written) than the pictures were interesting, I thought I'd provide them here:
1. The Financial Services Oversight Council: President Obama wants to install a single agency that’s charged with overseeing the entire financial system -- and which would make sure that government regulatory bodies actually work together. Call it a National Department of Risk.
Bottom line: Presumably, someone will be watching out for those now-ubiquitous “systemic risks.”
2. A Bigger, Beefier Fed: Under Obama’s plan, chairman Ben Bernanke and the Fed will keep their newly expanded powers. The Fed will oversee, well, almost any financial institution. If companies don’t behave, the Fed can now “compel corrective actions” and has “emergency authority.”
Bottom line: Don’t mess with the Fed. Wall Street will continue to have to placate the central bank.
3. Leverage, So Outdated: Obama’s reforms will require companies like the failed Lehman Brothers to have certain levels of cash on hand for emergencies, and to cover consumer deposits. Safety nets, in other words.
Bottom line: The days of cheap loans are likely gone, both for corporations and consumers. Capital requirements could also dampen Wall Street earnings.
4. Safer Financial Innovation: The Obama plan will rein in those combustible and exotic financial products like over-the-counter derivatives and credit default swaps. The plan also aims to remedy loan securitization.
Bottom line: The company that gives you a loan will now have a stake in making sure you’ll pay it, which should help prevent another mortgage crisis.
5. The Consumer's New Best Friend: Say hello to the Consumer Financial Protection Agency, which will try to protect Main St. from complex mortgages, credit cards and predatory lenders. Think of it as the FDA for finance.
Bottom line: Curbing abusive practices from lenders and financial companies will certainly help. But no word on whether or not this new agency will make your credit card statements any easier to read.
