The Senate is once again addressing the financial regulatory reform bill, and passage appears a step closer July 12 with the news that Massachusetts Republican Scott Brown is throwing his weight behind the legislation.
The bill's Democratic authors now have 59 of the 60 votes they need to advance the package. Maine Republican Susan Collins also gave her support.
Yet, if and when the bill passes the Senate and is signed into law by the president, the responsibility of crafting new financial rules will fall to regulators.
According to an analysis by Brookings Institution economic studies fellow Douglas J. Elliott, lawmakers have done little to delineate specifics in the bill. Congress orders banks to cease proprietary trading within three years, for example - the so-called "Volcker Rule" - but the definition of "proprietary" is unclear, and allowable exemptions to the rule are no less opaque.
The new Consumer Financial Protection Agency, too, is subject to a paucity of specific guidelines. "Regulators will decide almost everything about how [it] works," Elliott wrote.
In derivatives trading, as well, regulators are responsible for setting new rules. The Securities and Exchange Commission and the Commodity Futures Trading Commission will be tasked with determining which derivatives are sufficiently "standardized" to be traded in central clearinghouses.
Even if the financial reform bill is close to passing, the work of implementing the legislation will go on for some time.
