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Financial reform moves up in US with Congress nod

US Congress approved a sweeping expansion of financial regulation on Thursday, reflecting a renewed mistrust of financial markets after decades in which Washington stood back from Wall Street with wide-eyed admiration.

world Updated: Jul 17, 2010 02:02 IST

US Congress approved a sweeping expansion of financial regulation on Thursday, reflecting a renewed mistrust of financial markets after decades in which Washington stood back from Wall Street with wide-eyed admiration.

The bill, heavily promoted by President Barck Obama and Democrats as a response to the 2008 financial crisis, cleared the Senate by a vote of 60 to 39.

The vote was the culmination of nearly two years of fierce lobbying and intense debate over the appropriate response to the financial excesses that dragged the nation into the worst recession since the Great Depression.

The bill subjects more financial companies to federal oversight, regulates many derivatives contracts, and creates a panel to detect risks to the financial system along with a consumer protection regulator. It leaves vast round of details for regulators to work out.

Over the last half-century, as traders and lenders increasingly drove the nation's economic growth, politicians passed a series of landmark bills that allowed financial firms to become less transparent and more profitable.

Usury laws were set aside. Banks were allowed to sell insurance and trade securities. The government did nothing as the bulk of financial activity moved into a parallel universe of private investment funds, unregulated lenders and black markets like derivatives.

That era was gaveled to an end as the Senate gave final approval to a bill that reasserts the importance of federal supervision of financial transactions.

"The financial industry is central to our nation's ability to grow and to innovate. This reform will foster that innovation, not hamper it," Obama said. "Unless your business model depends on cutting corners or bilking your customers, you have nothing to fear."

The White House said President Obama would sign the legislation next week.