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The New Financial Reform Bill: What Does it Mean for You?

By , Posted on Jul 14, 2010
General
General

You may have seen stories in the news lately about the Financial Reform Bill, but still might be confused about what it all means, especially when it comes to your financial situation.

Though the bill would cause some changes it might not affect your financial situation or any loans you may have taken out immediately. In fact, it is more of a precautionary program that would be set in place so future financial meltdowns could be prevented.

Though there are other parts of this bill, it can mainly be outlined in three basic sections.

The first part of the bill states that regulators would have more authority. It is not a big secret that in the past regulators have had a dangerously friendly relationship with financial firms and lenders, or more bluntly, just haven’t been as strict as was necessary. If the new bill were to pass, regulators would be overlooking items such as mortgages and complex securities. This measure might prevent past mistakes such as undocumented loans.

The next part of the bill would require financial firms to retain less debt and store more capital in reserve. By having more capital in reserve, firms would be able to use it as a cushion if investments go bad.

The last major part of the bill comes in if, even after the first two precautions, a firm is still unable to manage themselves. In this case, the government would be allowed to seize the firm long enough to sell off its parts.

Though the new bill seems like it might make a positive change in the way that finances are handled by firms, due to a lack of bipartisanship support the bill may have lost the strength it was expected to have.

In the end, the bill, if passed, may not immediately affect any loan you may have, but it could affect future loans and other ways of borrowing, along with the way firms use your money.

To read more about the bill go to: http://topics.nytimes.com/topics/reference/timestopics/subjects/c/credit_crisis/financial_regulatory_reform/index.html?inline=nyt-classifier


Sources:

http://topics.nytimes.com/topics/reference/timestopics/subjects/c/credit_crisis/financial_regulatory_reform/index.html?inline=nyt-classifier

http://topics.nytimes.com/top/reference/timestopics/organizations/s/securities_and_exchange_commission/index.html?inline=nyt-org

http://topics.nytimes.com/top/reference/timestopics/subjects/d/derivatives/index.html?scp=1-spot&sq=derivatives&st=cse

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