TOPICS > Economy

Reconciling House and Senate Financial Reform

BY Carolyn O'Hara  May 21, 2010 at 12:00 AM EST

Sen. Chris Dodd, D-Conn., and Senate Majority Leader Harry Reid tout the reform push. (Getty)

The Senate passed sweeping financial regulatory reform late Thursday by a vote of 59-39 (here’s how they voted), taking aim at the factors that led to the 2008 crisis and reshaping the agencies (and creating some new ones) that will govern how Wall Street and the financial system operates.

But even after more than a year of debate, which saw Wall Street titans testifying on Capitol Hill, wild market swings, and continued financial upheaval overseas, this legislative story is not over: The next step is to reconcile the bills passed by the House and Senate.

Here are the major differences up for reconciliation (and a guide to the Senate amendments debated in recent days):

House

Senate

Consumer Protection

Independent consumer protection agency; auto dealers, accountants, and real estate agents, among others, are excluded from oversight

Agency within the Federal Reserve; Small businesses that do not engage in financial activities are excluded from oversight

Federal Reserve

Allows GAO audits of the Fed; Fed is prevented from injecting money into financial institutions; Fed loses consumer protection oversight

Allows one-time GAO audit of the Fed; Fed retains oversight over smaller, regional banks; Fed can break apart large companies that pose a threat to the financial system

Derivatives

Most must be traded through exchanges and monitored by the SEC and CFTC

Banks barred from trading derivatives; Fewer corporate exceptions to the exchanges rule

Too Big to Fail

Creates a $150 billion fund of levies on largest financial firms to cover costs of firms’ failures; 11-member Financial Stability Council, made up of existing regulators, will oversee financial system

Costs for failed firms would be pooled to largest firms after a failure; Large, failing firms can be liquidated in a process similar to that used by FDIC to seize a failing bank; 9-member Financial Stability Council, made up of existing regulators, will oversee financial system and recommend to the Fed new rules to govern complex firms in order ensure their stability

Proprietary Trading

Does not ban proprietary trading (Volcker Rule was proposed after House passed its bill)

Includes a version of the so-called Volcker Rule, which would prevent banks from making investments with their own money, for their own profit, but regulators will first study such trading before restricting it

Corporate Governance

Shareholders get non-binding vote on executive pay; Independent directors set compensation policy

Shareholders get non-binding vote on executive pay; Independent directors set compensation policy; ‘Clawback’ provision in which executives would give back compensation based on inaccurate financial statements

–Sources: Texts of House and Senate bills; Associated Press; New York Times; Wall Street Journal.