Reporting from Washington — Almost two years after the worst financial crisis since the Great Depression, congressional negotiators completed work Friday on landmark legislation designed to prevent a recurrence by dramatically expanding the government's oversight of the financial industry.
The regulatory overhaul, expected to get final approval by the House and the Senate next week, would affect all aspects of the financial system, from the pennies banks charge merchants each time they swipe a customer's debit card to the multitrillion-dollar market for complex derivatives.
The final details, hashed out in a marathon 20-hour session, ended a yearlong process that saw Wall Street firms and major business groups lobby aggressively against new regulations.
The sweeping legislation — about 2,000 pages long — would create a new agency to protect consumers in the financial marketplace, empanel a council of regulators to monitor the financial system for major risks, impose tough regulations on complex financial derivatives, and grant the government power to seize and dismantle teetering firms whose failure would pose a danger to the economy.
The bill also outlaws some of the riskiest mortgage lending practices that led to the housing bubble, including loans written with no documentation of the borrowers' income.
Lawmakers on a joint conference committee labored until dawn to reconcile House and Senate versions of the legislation in time for President Obama to brief foreign leaders on the completed deal at the Group of 20 economic summit in Canada.
"Our economic growth and prosperity depend on a strong, robust financial sector, and I will continue to do what I can to foster and support a dynamic private sector," Obama said Friday before leaving the White House. "But we've all seen what happens when there's inadequate oversight and insufficient transparency on Wall Street."
"The reforms making their way through Congress will hold Wall Street accountable so we can help prevent another financial crisis like the one that we're still recovering from," the president said.
Wall Street stands to take a major hit under new rules that would limit the risks they take, force them to spin off parts of their lucrative derivatives operations and give shareholders more say in executive compensation.
The bill also threatens to overwhelm small banks with costly new regulations, said Edward Yingling, president of the American Bankers Assn.
"This bill will, in the end, add well over a thousand pages of new regulations for even the smallest bank," Yingling said. "As a result of this volume and the new restrictions, many small banks are telling us they will simply have to sell out to larger institutions that have the staff to deal with the massive volume of new reports and rules."
Business groups and most congressional Republicans also opposed the new Consumer Financial Protection Bureau, the centerpiece of the overhaul package. Opponents said the agency was likely to put new restrictions on credit cards and other consumer loans, which would result in higher costs and fewer choices for consumers.
In a defeat for the administration, however, auto dealers and their business allies managed to win an important exemption: Dealers who arrange consumer auto loans (but don't lend their own money) will not come under the agency's oversight.
Key Democrats and the administration pushed hard to include dealer-arranged financing in the bureau's purview. But auto dealers and their allies argued aggressively that the additional oversight wasn't needed and would raise the prices of cars while hurting the struggling auto industry.
Despite that setback, consumer advocates said the bill's establishment of a powerful watchdog agency was a major step forward.
The depths of the financial crisis and the deep recession it triggered helped supporters overcome the army of lobbyists deployed by the industry, said Ed Mierzwinski, consumer program director of U.S. Public Interest Research Group, a consumer advocacy federation.
"It's not just some complicated thing in Washington. You see it when your neighbor's house is boarded up or you're laid off and you open up your 401(k) and … it reads like a Stephen King novel," he said. "The public was affected deeply by this crisis."
Lawmakers are racing to meet Obama's July 4 deadline for passing his top legislative priority heading into November's midterm elections. Lawmakers christened the bill the Dodd-Frank Act after the two main architects, Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) and House Financial Services Committee Chairman Barney Frank (D-Mass.).
"We've done something that's been badly needed, sorely needed for a long time, and we hope will protect our country, create the kinds of jobs and wealth and optimism and trust once again in our financial systems that's been so missing," Dodd said after the final vote shortly before 6 a.m. EDT. "It's a great moment."