Here's a comprehensive breakdown of the most and other important points about the recently unveiled too-big-to-fail bill, section by section with notable quotes. This bill is not exactly a too-big-to-fail bill and is not quite a break-up-the-banks bill either because it is mostly dealing with the issue of what to do when large banks fail. Most of the bill will be unable to stop "business as usual" from happening from the onset and allows large systemic risk failures to happen for the most part. If the bill had more clear, strict orders for identifying systemic risk, such as limits on assets, tiered reserve requirements, the unwinding of complex investments with personal deposits, we'd really be setting ourselves up for a more innovative, constructive economy where competition isn't limited. The key to how important this bill can be or how much more safe we are with it depends truly on how sincere our reps are actually about it.

Full text or summary. Major points of the bill, quotes pulled from a a Washington Post article, and statements from the House Financial Services Committee, which are noted with abbreviations below:

SUBTITLE A – The Financial Services Oversight Council, pp. 1-11
- Creates a council of regulators to monitor risks of finance companies to the entire financial system, led by the US Treasury. This move is fully in line with our analysis on who should play regulator. The Federal Reserve shouldn't get oversight powers until it earns it and is reformed for being too much in the pockets of the bankers. A council made up of officers from each of the offices can be more objective but we do have to watch over them, especially the US Treasury -- we also think they should be completely transparent and on record. One issue though is that, "[the bill] would also give the Federal Reserve Board a lead role in directly supervising many of the largest financial conglomerates."-NYT; "Frank's bill, however, gives more power to the council than the administration originally envisioned, including the ability to determine which firms are put under the Fed's umbrella of oversight." Our NO New Powers for the Fed" petition has done some good - we can say we're getting what we want. This move by Frank and others shows that even petitions matter and we are helping to change the way everyone thinks about power structures.

SUBTITLE B – Prudential Regulation for Financial Stability Purposes, pp. 11-46
"Harmonizes and consolidates holding company regulation so there is “no place to hide,” ensures communication and coordination among regulators and maintains clear lines of authority. Subjects firms or activities that pose significant risks to the system to heightened, comprehensive scrutiny by Federal regulators. Removes the Gramm-Leach-Bliley Act’s restraints on the Fed’s authority over companies subject to consolidated regulation and provides specific authority to the Fed and other federal financial agencies to regulate for financial stability purposes and quickly address potential problems." -HFS

SUBTITLE C – Supervision and Regulation of Federal Depository Insts., pp. 46-96

"The legislation would impose new restraints on industrial loan companies — financial institutions owned by commercial enterprises like retailers or manufacturers — and, in the future, would not permit any more commercial companies to own banks. The committee, striking a compromise with the administration, preserves the thousands of thrift charters that the White House proposed to eliminate, but it gives supervision of thrift holding companies to the Fed to prevent them from shopping for the least restrictive regulator." -NYT

SUBTITLE D – Regulation of BHCs and Depository Insts., pp. 96-127
"require hedge funds, private equity funds and offshore pools of capital to register with the Securities and Exchange Commission.. [Representative Paul Kanjorski] added the requirement of registration by offshore funds. Without that, he said, regulators could not get a broad picture of the marketplace. Mr. Kanjorski’s legislation contained an exemption for venture funds, but they would have to provide more information to regulators in other ways."-NYT "The central bank would also have the power, when it reviews firms, to require financial holding companies to “sell or otherwise transfer assets or off-balance sheet items to unaffiliated firms.” The central bank could also require that the firms terminate certain activities or impose other conditions. The legislation would also preserve the federal charter for thrifts -- savings and loans firms -- but would shift all the current powers of the Office of Thrift Supervision (OTS) to the Office of the Comptroller of the Currency (OCC). Frank's bill would also mandate existing non-banks, industrial loan companies and other similar companies that engage in commercial activity to create a bank holding company." -The Hill

SUBTITLE E – Payment, Clearing, and Settlement Supervision, pp. 127-57
"Under the proposal, future rescues of large institutions would be paid for by other big firms. The proposal says that any financial company with assets of more than $10 billion would have to contribute to the rescue of a failed firm. The legislation emerged after community banks lobbied to ensure that small institutions would not have to pay for future bailouts." -NYT

SUBTITLE F – Improvements to the Asset-Backed Securities Process, pp. 157-64
"The legislation approved by the committee on Tuesday would also give the commission the authority to abolish the requirement that brokers force customers to take disputes to arbitration. And it would establish a fund to compensate whistle-blowers on Wall Street who report unlawful activity... would tighten restrictions on credit rating agencies and would explicitly give investors the ability to sue the companies if they violate federal securities law and “knowingly or recklessly” fail to review significant information as they prepare their ratings." NYT

SUBTITLE G – Enhanced Resolution Authority, pp. 164-253
"Provides for the orderly wind-down of failing firms and ends “too big to fail” to ensure that industry and shareholders absorb the risks and costs of failure, not taxpayers."-NYT; "[The bill would] empower the government to seize troubled firms other than banks that are deemed "too big to fail. Officials at Treasury and the Fed have pushed for "resolution authority" over non-bank financial firms for months, viewing it as one of the most important tools for dealing with future crises. "-WP

This quote sums up the general reaction to the bill from the two parties in power: "Concerns have also deepened in Congress, among Republicans and some Democrats, that the program could amount to a permanent bailout fund and reduce private market discipline by being too generous to creditors of failed firms. Despite such differences, the problem is clear to all sides: Banks got so big that federal officials could not let them fail without risking catastrophic consequences for the economy. During the crisis, the government arranged mergers that pushed troubled banks into the arms of more stable firms. Big firms got even bigger. Senior officials now worry that these financial behemoths could return to the reckless behavior that led to the crisis, reasoning that federal officials will clean up any mess. "-WP

We are glad to hear that the European Union has approved the breaking up of a bailed out bank into a good bank and a bad bank. It's a trial I'd really like to see happen. The reasons are exactly my reasons for becoming engaged in the fight from the beginning:
"Important structural changes, including the split of the bank into two entities and a significant reduction of its market presence, will allow the bank to become viable in the long-term and limit distortions of competition,” the European competition commissioner, Neelie Kroes, said in a statement." .. They argued that a lack of competition in the sector could impede Britain’s economic recovery by not providing enough credit to smaller companies and households. The high market share concentration also makes for a less stable banking system that is more vulnerable to future banking crises, they said."

We're happy to support Rep. Grayson's Unmask the Fed campaign (tx Zephyr) calling for a Bernanke reappointment delay until he discloses where he sent $2 trillion in taxpayers' money.

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