On Thursday, the Senate helped bring financial reform one step closer to reality by approving legislation designed to get at some of the roots, at least, of the economic destruction that Wall Street wrought two years ago. The vote was mostly split along predictable partisan lines, with a couple outliers on the Republican side and one Democratic vote against the bill from Sen. Russ Feingold. –KA

The New York Times:

Passage of the bill would herald the end of more than a generation in which the prevailing posture of Washington toward the financial industry was largely one of hands-off admiration, evidenced by steady deregulation. While the measure does not fully restore the toughest restrictions imposed after the Great Depression, it is a clear turning point, highlighting a new distrust of Wall Street, fear of the increasing complexity of technology-driven markets, and renewed reliance on government to protect the little guy.

The bill would create a council of high-level federal officials, led by the Treasury secretary, to try to detect, and perhaps prevent, systemic dangers to the financial system, and it would give the government new authority to seize and shut down failing financial institutions, by liquidating assets and forcing shareholders and creditors to take losses.

It would create a powerful consumer financial protection bureau, to be housed in the Federal Reserve, and widely expand the regulatory authority of the central bank. It would widen the purview of the Securities and Exchange Commission to strengthen regulation of hedge funds, other private equity firms, and credit rating agencies.

The bill also seeks to curb the most risky behavior on Wall Street, by restricting the ability of banks to invest and trade for their own accounts — a provision known as the Volcker rule, and by creating an extensive regulatory framework for derivatives, the complex financial instruments that were at the heart of the 2008 crisis.

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