US lawmakers hammered out a historic overhaul of financial regulations as dawn broke over the nation’s capital on Friday, handing US President Barack Obama a major domestic policy victory on the eve of a global summit devoted to financial reform.
In a marathon session of more than 21 hours, congressional negotiators agreed to a rewrite of Wall Street rules that may crimp the industry’s profits and subject it to tougher oversight and tighter restrictions.
The bill, the most sweeping financial rules revamp since the 1930s, is headed toward final congressional approval next week although implementation will be bogged down for months in regulatory rule-making.
The legislation would set up a new financial consumer watchdog, create a protocol for dismantling troubled financial firms and mandate higher bank capital standards, all in an effort to avoid a repeat of the credit crisis that hammered the economy and triggered taxpayer bailouts of floundering firms from 2007 to last year.
To secure agreement, lawmakers reached deals in the final hours on the most controversial sections, which restrict derivatives dealing by banks and curb their proprietary trading to shield taxpayer-backed deposits from more risky activities.
Banks will be allowed to keep most swaps dealing activity in-house, although the riskiest trading would be pushed out to an affiliate. They will also be permitted small investments in hedge funds and private equity funds.
The concessions could lessen the impact on bank profits.
The reforms must still win final approval from both chambers of Congress before Obama can sign them into law. Quick approval is expected.
Democrats had raced to complete their work before Obama left for a weekend meeting of the G20 economic powers, where he can tout the changes as a blueprint for other countries.
“Just as economic turmoil in one place can quickly spread to another, safeguards in each of our nations can help protect all nations,” Obama said at the White House shortly before departing.
Despite last-minute deals, the bill has actually gotten tougher in its yearlong journey through the halls of Congress. Democrats rode a wave of public disgust at an industry that awarded itself rich paydays while much of the country struggled through a deep recession.
“They tried to water it down, but still there’s enough regulation in there that it’s going to affect banks, it’s going to affect their profitability,” said Chris Hobart, founder of Hobart Financial Group in Charlotte, North Carolina.
Passage of the bill will give Democrats an important legislative victory, alongside healthcare reform, ahead of congressional elections in November. As part of the package, financial institutions would have to pay US$19 billion to cover the estimated cost of the bill.
The bill would dramatically reshape the US financial landscape. The industry is already turning its sights on how it might influence implementation by regulators.
“We need to hold the course,” Federal Deposit Insurance Corp Chairman Sheila Bair, one of the regulators who would be charged with putting the reforms in place, told reporters. “We cannot let ourselves forget what happened in October of 2008” when the financial system risked breaking down.
The legislation sets up a new agency within the Federal Reserve charged with protecting consumers of financial products. It also gives regulators new power to seize troubled financial firms before they harm the broader economy.
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to