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Role for states in Wall St reform

The US Senate voted to give state authorities a role in enforcing new bank consumer protection rules as lawmakers sought on Tuesday to complete their financial regulation package before a series of final votes on landmark Wall Street reform.

india Updated: May 19, 2010 20:27 IST

The US Senate voted to give state authorities a role in enforcing new bank consumer protection rules as lawmakers sought on Tuesday to complete their financial regulation package before a series of final votes on landmark Wall Street reform.

With a final vote expected on Wednesday or Thursday, the Senate was closing in on the biggest overhaul of financial regulation since the 1930s, which is likely to weigh on the banking industry’s future profits by as much as 20 per cent, according to a Goldman Sachs note.

Political momentum has been running heavily against the financial industry, which has fought for months to kill or weaken the reform bill only to find now that lawmakers have tightened the crackdown.

The Senate voted 80-18 on Tuesday to give state attorneys general a prominent role in helping a new federal watchdog enforce consumer protection laws, but the measure bars officials from reaching across states to bring charges against banks.

Some disputes are still unresolved. Democrats moved to modify a proposal that would prevent taxpayer-backed banks from using their own money to engage in speculative trading. An effort to bring this up for vote was blocked by Republicans.

“The Republican leadership is obviously carrying Wall Street's water,” Democratic Senator Carl Levin said.

US bank stocks closed lower on Tuesday, with the KBW Banks index of large bank shares declining 3.7 per cent.