Big changes are in store for the financial world from a government crackdown more than a year in the making.
Democratic leaders in the Senate are trying to secure the final votes needed to pass legislation this coming week that would impose the most sweeping rules on banks and Wall Street since the Great Depression. The financial industry and consumers already are anticipating -- in some cases bracing for -- the impact.
Banks might see their bottom lines suffer. Lenders will have to disclose more information. Borrowers will have to prove their ability to repay. The masters of high finance will find it harder to sidestep regulations. Government watchdogs will be under orders to look more suspiciously at risky behavior.
Not all the changes will occur overnight once Congress gets the legislation to President Barack Obama. Throughout the 2,300-page bill, federal monitors are given one to two years to write the new rules of the road for Wall Street. In some instances, the timing isn't even specified.
Diana Farrell, deputy director of the White House's National Economic Council, says some adjustments already are under way as big banks re-examine their trading business and prepare for a new oversight system that will require them to write their own funeral plans in the event of failure.
"There is some immediate impact," said Scott Talbott, senior vice president at the Financial Services Roundtable, an industry group representing some of the bigger banks in the United States. "But it will take about two years before the full impact is felt, before the uncertainty starts to dwindle."
"Overall," said Travis Plunkett, legislative director of the Consumer Federation of America, "starting with the consumer regulations, this is landmark legislation."
The bill has ended up as a highly partisan piece of legislation. The House passed it June 30 with only three Republicans voting in support.
It needs 60 votes in the Senate. Majority Leader Harry Reid, D-Nev., delayed a final Senate vote until after the July Fourth holiday because of the death of Sen. Robert Byrd, D-W.Va., and hesitation from three Republicans who previously had supported the legislation. One of those Republicans, Sen. Susan Collins of Maine, has since announced endorsed it.
The other two Republicans -- Sen. Scott Brown of Massachusetts and Olympia Snowe of Maine -- said they wanted to study the bill over the holiday break. Both have indicated the bill is more to their liking after House and Senate negotiators dropped a plan to impose a $19 billion tax on large banks and hedge funds to pay for the bill.
Also, Sen. Maria Cantwell, D-Wash., who had voted against a Senate version of the legislation in May, has said she will now vote for the bill.
But a fourth Republican who supported the Senate version -- Sen. Charles Grassley of Iowa -- has reservations about the alternative financing mechanism negotiated by Senate and House Democrats and the White House. The new method of covering the cost of the bill would use $11 billion generated by ending the unpopular Troubled Asset Relief Program -- the $700 billion bank bailout created in the fall of 2008 at the height of the financial scare. Democrats also agreed to increase premium rates paid by commercial banks to the Federal Deposit Insurance Corp. to insure bank deposits.
Grassley's spokeswoman, Jill Kozeny, said the senator is concerned using the FDIC fees as a credit to the FDIC and as an offset, and prefers that the remaining bailout money help pay down the debt.
That leaves little room for error in the vote counting. Without Grassley and with the timing of seating a replacement for Byrd still uncertain, Cantwell, Collins, Snowe and Brown would give the bill exactly the 60 votes needed to overcome potentially fatal procedural delays.
The finished legislation hews closely to the plan that Obama's administration released in June 2009.
"That's been one of the most pleasant surprises of this process," Farrell said in an interview.
In some instances, the final bill is even tougher. The administration and Democrats in Congress squabbled over details on capital standards for banks and the breadth of restrictions on their derivatives business. Derivatives are financial instruments whose values change based on the price of some underlying investment. They were used for speculation, fueling the financial crisis.
The most symbolic and high-profile defeat for the president was an exception in the bill carved out for auto dealers, who won't fall under the supervision of a new consumer protection bureau. Obama had looked upon consumer protections for home and auto buyers as features that would sell the bill to the public, but auto dealers proved to be a tough lobbying and political foe, pressing their case with lawmakers that they merely assembled loans and didn't administer them.
While Obama would have preferred an earlier conclusion for the bill, its passage less than four months from the general election is as good as it can get politically.
The partisan lines will lead Democrats to cast Republicans as the party of Wall Street, exploiting a populist, anti-big bank sentiment among voters. Republicans will portray it as big government overreach.
The legislation is a blend of specific prescriptive remedies that regulators must undertake and broader regulatory guidance.
For example, it spells out what the Federal Reserve must take into account in setting new limits on the fees that banks charge merchants who accept debit cards.
At the same time, it gives regulators leeway in such areas as the definition of a commercial user of complex derivatives -- typically large manufacturers and industries such as airlines that use derivatives as hedges against market fluctuations. Regulators also would decide how much money those users should put up to cover their bets.
The bill directs regulators and other government agencies to undertake more than 60 studies that will determine if or how new rules will be put into place.