Financial Reform Brings Uncertainties

Markets sold off on Tuesday when new questions arose regarding the much unknown Financial Reform Bill which has been floating around, not being able to get approved as of now. However, it was announced today that certain bank taxes would be eliminated to help entice some of the moderate republicans to vote it on through to approval. As such, financials sold off as many do not quite know all of the consequences that will follow with the passing of this bill. At any rate, I expect to see continual weakness throughout this week (despite the good possibility of a rebound tomorrow). I thought I would post a good article going into more detail about the changes that was posted on Reuters:

Democrats on Tuesday planned to strip out a controversial tax from their landmark financial reform bill in order to win the swing votes needed to pass it through Congress.

With crucial Republican moderates threatening to withdraw their support, Democrats were weighing alternative ways to fund the most sweeping rewrite of the Wall Street rulebook since the 1930s.

Though a supposedly final version of the bill had been hammered out last week, Democrats in charge of the process called a fresh negotiating session, which got under way shortly after 5 p.m. EDT Tuesday.

Democratic lawmakers and aides said they planned to remove a $17.9 billion tax on large financial institutions. Instead, they would cover most of the bill's costs by shutting down a $700 billion bank-bailout program.

"I haven't talked to everybody, but I gather from a number of people they like this option,'' said Democratic Senator Christopher Dodd, one of the lawmakers in charge of the bill.

The bill had been expected to pass both chambers of Congress this week in time for President Obama to sign it into law by July 4. But supporters have been forced to scramble for votes in the Senate, putting that goal in jeopardy.

Analysts said while that timetable may slip, the bill was still likely to become law.

"We believe that this legislation will pass, timing and the bank tax remain the final question marks,'' wrote FBR Capital Markets analyst Edward Mills in a research note.

Democratic aides said it was still possible to pass the bill out of Congress by the end of the week.

Democrats are now two votes short of the 60 needed to clear a Republican procedural hurdle in the Senate. Democratic Senator Robert Byrd died on Monday, depriving his party of a needed vote, and Republican Senator Scott Brown said on Tuesday he would withdraw his support unless Democrats strip out a $17.9 billion tax that would apply to large financial institutions.

The tax was added to cover the costs of the bill during a final all-night negotiating session last week.

"It is especially troubling that this provision was inserted in the conference report in the dead of night without hearings or economic analysis,'' Brown wrote in a letter to the Democrats who are handling the bill.

Other moderate Republican senators who previously supported the bill have also expressed reservations over the new tax.

One of those Republicans, Senator Susan Collins of Maine, told reporters she was working with Dodd to get away from the tax and they were "making progress.''

"The bill is not perfect. But I believe if you take out the new bank tax that, on balance, it would improve our financial system and I would support it,'' she told reporters.



    Financial reforms will come slowly but surely.

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