|DANIEL WAGNER, AP Business Writer|
The Obama administration has argued that it went as hard on banks as possible without further upsetting global finance. Now Democratic lawmakers and administration officials say
Still, many in the industry warn against reading too much into one trading loss. They say losing money is an inevitable part of taking risk, as banks must.
Here's a look at four key parts of the financial overhaul and how they might be affected by
THE VOLCKER RULE
This provision restricts banks' ability to trade for their own profit, a practice known as proprietary trading. It is named for former Federal Reserve Chairman
_ Battle lines: Banks say it disrupts two of their core functions: Creating markets for customers who want to buy financial products and managing their own risk to prevent major losses.
They say proprietary trading was not a cause of the 2008 financial crisis and the rule is a means of political revenge on an unpopular industry. Advocates of stronger regulation argue that the rule would have prevented
_ State of play: A draft of the rule satisfied neither side. It includes exceptions for hedging against risk and for market-making, but banks say they the exceptions are too narrow and difficult to enforce. It's nearly impossible to tell whether a bank bought or sold something for itself or for customers.
ENDING `TOO BIG TO FAIL'
During the 2008 financial crisis and the bailouts that followed, the government was unwilling to let the biggest banks fail, for fear of upending the financial system. As part of the overhaul,
_ Battle lines: Most players agree that this is a good idea, despite some differences on the details.
_ State of play: The
Banks have been working with regulators to create "living wills" detailing how they would wind themselves down without disrupting markets. This exercise has forced them to look more deeply at their operations _ a defense against the accusation that banks have grown "too big to manage."
However, U.S. regulators can't do it alone. A big problem after the failure of
Regulators are negotiating with their European counterparts, but it could take years before they agree on rules that would allow a global company to dismantle itself without spreading confusion through the financial markets.
_ Battle lines: Overhauling the rules governing this market, estimated at
The agency most responsible for implementing these rules, the
Advocates for stronger regulation argue that the new rules apply to the sorts of derivatives believed to have magnified the financial crisis _ and
_ State of play: About half the rules are done, but many crucial questions have yet to be decided. The rules will be phased in this fall through next spring. Banks are lobbying hard to protect their hold on this profitable business. Banks support pending legislation that would limit U.S. regulators' control over derivatives trades by their overseas affiliates.
The overhaul calls on the Federal Reserve to oversee the biggest and most important financial companies and apply a stricter set of standards for financial fitness. For example, the companies must hold more capital as a buffer against future losses. Before, the biggest banks were overseen by a patchwork of regulations.
_ Battle lines: Industry officials say they're working with regulators to fine-tune how big companies will be overseen. They are concerned, for example, about the extra costs imposed on the big companies to offset the extra risk they create in the financial system.
_ State of play: Industry officials say many of these changes were happening behind the scenes even before the financial overhaul was passed in 2010. They say banks already are better capitalized and meet other standards laid out by regulators.
It's still not known exactly which financial companies will fall into this category. The biggest banks are included automatically. Regulators have more discretion when it comes to what are known as non-bank financial companies, such as huge insurance companies. Companies on the margin reportedly are lobbying hard to avoid this designation.
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