Client Newsletters

Wall Street Reform: Recap of Major Provisions

Recap of the Major Provisions

On Wednesday, July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. The law is aimed at curtailing risky trade practices, regulating the derivatives market, and preventing shocks to the economy caused by the failure of large financial institutions.

Following are some of the key measures:

No More "Too Big to Fail" Bailouts. The federal government will now have the power to seize and liquidate failing financial firms. In addition, large financial institutions will face stricter capital, leverage, and liquidity requirements to make being too big undesirable. These firms must also have plans in place for an orderly "winding-down" of their business should they fail. The law also limits the amount of funds the FDIC can lend to a troubled firm to an amount they reasonably believe can be collected in the sale of the firm's assets.

New Consumer Protection Bureau. The bill establishes a new Consumer Protection Bureau with the task of protecting consumers from abusive practices within the financial industry. The bureau will monitor mortgages, credit cards, and other loan products.

New Financial Stability Oversight Council. This new council will be composed of regulators chaired by the Treasury Secretary. It will monitor systemic risk in the market and can order the seizure of failing banks. The Council is designed to serve as an "advanced warning system" to expose risks that might threaten the economy.

Oversight of Derivatives. The government will now have the authority to regulate over-the-counter derivative markets to curb excessive risk-taking. Derivative trades must now pass through clearing houses or swap repositories to increase market transparency and allow the government to impose capital and margin requirements on swap dealers and participants.

The "Volker" Rules. This set of rules is designed to limit big, insured banks' activities in speculative derivatives and stock investments. The rules require big banks to sell off much of their interest in hedge funds and private equity firms. The rules are created to prevent a bank's investments in non-banking, risky ventures, from causing institutional failure that could create havoc in the entire market.

Reduced Swipe Fees and interchange fees on Debit/Credit Cards. The law will curb the fees retailers are required to pay banks and credit unions on debit and credit card transactions.

Oversight of Credit Rating Agencies. The SEC will oversee rules requiring Nationally Recognized Statistical Ratings Organizations to disclose their methodologies, use of third parties for due diligence efforts, and ratings track record. Investors will now be able to bring a private action against a rating agency for a knowing or reckless failure to conduct a reasonable investigation of facts or to obtain analysis from an independent source.

Many of these rules will take years to implement, and there is divided opinion over the effectiveness of the bill. Some think the bill does not go far enough in regulating the financial industry, while others fear that the regulations will make American banks less competitive. In addition, regulators have been given significant leeway to interpret the law and set new rules. Given all this, it will be years before we will understand the full effect of this historic bill's passage.

Wall Street Reform: What it Means to You

What it means to you

If you are like most Americans, reading a summary of the Wall Street Reform and Consumer Protection Act might better serve as an alternative to sleeping pills. So what does the bill mean to you?
	Limited Use of Debit/Credit Cards. You may start seeing minimum charge amounts for debit and credit cards. Visa and Mastercard rules are being loosened up to allow retailers to reject unprofitable transactions. Often using your debit card for a $1.00 can of soda can cost the retailer more to process the transaction than the purchase is worth.
	Home Mortgages Will Change. Most pre-payment penalties will be eliminated. Complex mortgage products will need to pass through the new Consumer Protection Bureau. Lenders are required to ensure that borrowers can pay the loans that they sell and the bill prohibits lenders from steering borrowers to more expensive loan options. Refinancing fees will also be reduced.
	Access to Your Credit Score. You'll be able to see your credit "score" free if you are refused for a mortgage. Currently you have the right to see your credit report free once per year, but until now you had to pay to see your credit score.
	Beware Car Loans. Car lenders are exempt from oversight by the Consumer Protection Bureau. So make sure you read any car loan papers carefully.
	Higher limits on Deposit Insurance. Effective immediately, the FDIC has permanently raised the limit from $100,000 on insured individual deposits to $250,000.
	No more $30 fee for a $2.00 overdraft You'll need to "opt-in" to expensive bank overdraft programs. Banks can no longer automatically charge you high fees for overdrafts. You will probably start seeing letters from your bank disclosing how overdraft fees are calculated and asking for your permission (opt-in) to their overdraft policy.
	Lower Prices? The Federal Reserve will try to ensure that fees charged to merchants by credit and debit card companies are reasonable and in proportion to the cost of processing the transaction. Because of this, you may see more discounts for cash payments OR even lower prices as merchants pass their credit card expense savings back to you.
	Emergency Mortgage Relief. The bill provides for $1 billion in bridge loans to qualified unemployed homeowners with reasonable prospects for re-employment to help cover mortgage payments until the homeowner is reemployed.
	New Bank Fees? You will need to review your bank's fee structure. Because banks will be losing some current revenue streams, expect banks to start looking for fees elsewhere. Be on the lookout for new fees, such as charges for checking accounts or online banking.
	No More Nasty Letters Required. If the "Act" is effective you'll no longer have to send nasty letters to your representatives regarding taxpayer bailouts. If institutions gamble and fail, they can no longer look to us to make them whole.

Credit CARD Act Means More Changes

Credit CARD Act Reform: Phase III The latest round of changes prompted by the Credit CARD Act passed last May goes into effect on August 22nd. Here is what you need to know: Late fees and over-limit fees will be capped at $25, with a $35 fee for any second offense within six months. Inactivity fees for cardholders not using their cards frequently enough will be eliminated. Any rise in a card's annual percentage rate must be explained to consumers and must be reevaluated every six months. These changes are in addition to the credit and debit card provisions coming out of the recent Wall Street Reform bill.

Outdoor Home Improvement Ideas

5 ideas that add value from the "outside in"

Outdoor repairs and projects can add significant value to your home. In fact, improving curb appeal is one of the best ways to maximize your home's value. Outdoor projects generally take time rather than expertise, making them ideal do-it-yourself and cost-saving projects. Here are five projects that can improve your home's curb appeal:
	Power washing: keep your home looking its best by cleaning the outside of your home. You can rent a washer from your local hardware store for less than $200.
	Touch-up Paint: touching up peeling paint not only makes your home look better, but it also prevents UV light and moisture from reaching the wood underneath which can lead to further peeling.
	Mulch: mulching around trees and flowerbeds makes them "pop" and adds visual appeal to your yard. It also helps keep flowers and trees healthier by trapping moisture and nutrients in the soil.
	Seal decks and fences: Outdoor woodwork needs protection from the elements to prevent bleaching and wear. Maintaining your woodwork saves you the expense of having to replace it down the road and keeps your home looking fresh.
	Gardening and pruning: Pruned trees, bushes, and flowerbeds add curb appeal, as well as beauty to your home. Planting trees may even cut down on your future air-conditioning and electricity bills!