13 Dec 2009

US House backs sweeping financial reform

8:32 am on 13 December 2009

The US House of Representatives has approved what is described as the biggest overhaul of financial regulation since the Great Depression of the 1930s.

The reforms were proposed by President Barack Obama in July to prevent a repeat of last year's financial crisis.

The House approved the Obama administration's proposals by 223 votes to 202, although with some amendments, the BBC reports.

If the legislation is enacted it will create a new agency to monitor consumer banking transactions and give the government new powers to break up companies that threaten the economy.

It also:

  • Gives regulators the power to dismantle companies in a way that ensures shareholders and unsecured creditors, not taxpayers, bear the losses.
  • Srengthens the powers of the Securities and Exchange Commission so that it can detect irregularities that could provide an early warning of fraudulent investment schemes.
  • Includes plans to regulate the vast market in derivatives.

Mr Obama has welcomed the passing of the bill, calling it "another important step closer" to the comprehensive overhaul of the financial system that he promised voters during his election campaign.

The reforms should promote sound investment, encourage competition and innovation and prevent a crisis from happening again, he says.

The Senate has yet to pass the bill.