WASHINGTONâ€”After more than 20 hours of continuous wrangling, Congressional Democrats and White House officials reached agreement on the final shape of legislation that would transform financial regulation, avoiding last-minute defections among New York lawmakers that had threatened to upend the bill.
After months of uncertainty about how the U.S. would craft new rules, the agreement offers the clearest picture since the financial crisis of how markets and the government will interact for decades to come. The common thread: large financial companies are facing a tougher leash.
The bill is expected to have enough support to become law. Both chambers plan to vote next week. The margin in the House and Senate will likely be close because most Republicans are expected to oppose the measure.
If the bill passes, President Barack Obama is expected to sign the package into law by July 4. Thursday’s agreement also gives the president leverage going into a weekend summit of world leaders in Canada, where he will prod other nations to rewrite their rules.
“This is about as important as it gets, because it deals with every single aspect of our lives,” said Sen. Christopher Dodd (D., Conn.), a chief architect of the compromise.
In two important ways, the agreement is tougher on the banking industry than officials in the Treasury Department anticipated when they first drafted their version of the bill 12 months ago.
Lawmakers agreed to a provision known as the “Volcker” rule, named after former Federal Reserve Chairman Paul Volcker, which prohibits banks from making risky bets with their own funds. To win support from Sen. Scott Brown (R., Mass.), Democrats agreed to allow financial companies to make limited investments in areas such as hedge funds and private-equity funds.
The move could require some big banks to spin off divisions, known as proprietary-trading desks, which make bets with the firms’ money.
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