Highlights of the compromise legislation to overhaul financial rules:
A 10-member council of regulators led by the Treasury secretary would monitor threats to the financial system. It would decide which companies were so big or interconnected that their failures could upend the financial system. Those companies would be subject to tougher regulation.
If such a company teetered, the government could liquidate it. The costs of taking such a company down would be borne by its industry peers.
The council could overturn new rules proposed by the consumer protection agency. That's supposed to happen only to rules deemed a threat to the financial system.
A new independent office would oversee financial products and services such as mortgages, credit cards and short-term loans. The office would be housed in the Fed.
Auto dealers, pawn brokers and others would be exempt from the bureau's enforcement. For community banks, the new rules would be enforced by existing regulators.
The oversight council could block rules proposed by the consumer agency, but only if they determine the regulations would threaten the system.
Currently, consumer protection is spread among various bank regulators.
The Federal Reserve would lead the oversight of big, interconnected companies whose failures could threaten the system. Those companies would be identified by the council of regulators.
The Fed's relationships with banks would face more scrutiny from the Government Accountability Office, Congress' investigative arm. The GAO could audit emergency lending the Fed made after the 2008 financial crisis emerged. It also could audit the Fed's low-cost loans to banks, and the Fed's buying and selling of securities to implement interest-rate policy.
Big banks would have to reserve as much money as small banks do to protect against future losses. But big banks would have to replace hybrid forms of capital called trust preferred securities with common stock or other securities. Banks with under $15 billion in assets wouldn't have to replace those securities, but could not add more to their reserve funds.
Derivatives are financial instruments whose values change based on the price of some underlying investment. They were used for speculation, fueling the financial crisis. Under current law, they have been traded out of the sight of regulators. The new law would force many of those trades onto more transparent exchanges.
Banks will continue trading derivatives related to interest rates, foreign exchanges, gold and silver. Those deals earn big profits for a handful of Wall Street titans.
But riskier derivatives could not be traded by banks. Those deals would run through affiliated companies with segregated finances. The goal is to protect taxpayers, since bank deposits are guaranteed by the government.
Companies that own commercial banks could no longer make speculative bets for their own profits.
A related provision would have banned banks from investing in private equity and hedge funds. The final compromise scaled that back. Banks will be allowed to invest up to 3 percent of their capital in private equity and hedge funds.
Shareholders would vote on executive pay packages. But the votes wouldn't be binding. Companies could ignore them.
The Fed would oversee executive compensation to make sure it does not encourage excessive risk-taking. The Fed would issue broad guidelines but no specific rules. If a payout appeared to promote risky business practices, the Fed could intervene to block it.
CREDIT RATING AGENCIES
Credit rating agencies that give recklessly bad advice could be legally liable for investor losses. They would have to register with the Securities and Exchange Commission.
Regulators would study the conflict of interest at the heart of the rating system: Credit raters are paid by the banks that issue the securities they rate. Before the crisis, they bowed to pressure from the banks, lawmakers say. That's why the agencies gave strong ratings to mortgage investments that were basically worthless.
Lenders would have to make sure mortgage borrowers could afford to repay.
Lenders would have to disclose the highest payment borrowers could face on their adjustable-rate mortgages. Mortgage brokers could no longer receive bonuses for pushing people into high-cost loans.