The Obama administration has been saying that it will provide
better financial regulation, and the U.S. Senate made some progress
by passing two amendments aimed at obviating another copious
taxpayer bailout of Wall Street. Big banks and related financial
exchange traded funds (ETFs) wait on when the bills will become
The Senate voted an overwhelming 93 to 5 for a plan to set up a
new government protocol for seizing and dismantling large financial
firms that are in distress, ending the "too big to fail"
. Analysts expect the bill to be enacted into law in a matter of
weeks, but Republicans, Wall Street and banking interests have
worked to weaken and delay legislation.
The Federal Deposit Insurance Corp. will be able to manage an
"orderly liquidation" process for troubled firms that would pose a
risk to the banking system if they were on the brink of collapse.
Additionally, the Senate approved an amendment specifying that
taxpayer money cannot be used to bail out troubled firms. [
How to Protect Yourself.
Overhauling financial regulation could also improve oversight of
complex derivatives transactions through greater transparency,
which could prove to be a boon for financial clearinghouses and
exchange operations like the Chicago Mercantile Exchange (
), the IntercontinentalExchange (
) and LCH.Clearnet,
reports Robert O'Harrow Jr. for
The Washington Post
Why Some Are Bullish on Financial ETFs.
The Wall Street Transparency and Accountability Act will lessen
risks by restructuring how major banks trade derivatives and by
requiring most derivative contracts to be cleared by a
clearinghouse. The legislation may also have derivatives traded
Derivatives are used as a risk-management, or hedging, tool. The
agreements are between two parties that relies on something
occurring in the future, like the performance of an underlying
asset including commodities, equities or bonds. Derivatives have
become more complex and exotic over the years, and the risks only
If "too big to fail" is done away with, could derivatives and
other highly risky bets go the way of the dodo bird?
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Max Chen contributed to this article.