WASHINGTON - The new financial overhaul law triggers hundreds of new rules that regulators must draft and enact in the next two years. Some things, however, must be done immediately.
Chief among them is the appointment of a director to lead the Consumer Financial Protection Bureau, an independent agency that will issue and enforce rules regarding mortgages, credit cards and other consumer products.
The agency will oversee consumer products and services, from mortgages to check cashing. It will regulate many nonbank companies, such as payday lenders. Before the crisis, no regulator with financial expertise oversaw the most reckless mortgage lenders.
Though the financial overhaul's benefits have been widely reported, the law doesn't address every threat to the nation's financial system.
Consumer safety loopholes
The biggest is for auto dealers that provide loans financed by banks. The bureau can't scrutinize or punish them. It can't even ban misleading fine print.
The agency also won't police companies that the SEC regulates, such as stockbrokers.
Some other groups that won exemptions from the consumer agency's oversight: Mobile-home sellers, real estate brokers, accountants and insurers.
The bill doesn't include a fix for Fannie Mae and Freddie Mac, two companies at the heart of the mortgage finance system. They own or guarantee more than half of all U.S. mortgages. But they went into government conservatorship in September 2008 and have borrowed a combined $145 billion in federal aid.
Financial system loopholes
The bill won't fix the "too big to fail" problem, which resulted in massive multibillion-dollar bailouts at taxpayer expense. During the financial crisis the government refused to let the largest banks collapse. Officials wanted to contain the crisis. So they propped up faltering banks or helped sell them off. Trillions of taxpayer dollars were put at risk.
The law aims to make such failures rarer and less jarring to markets. But a handful of megabanks still dominate the industry. None would be allowed to fail, because officials still fear that could spark panic.
The agency's rules apply to community banks, too. But its enforcement won't. Instead, existing regulators will oversee the community banks' compliance. These regulators failed to protect consumers before the crisis.
Community banks weren't involved in the risky investing that shook Wall Street. But they issued some high-risk mortgages that consumers couldn't repay. And their lending practices caused the previous banking crisis: the savings and loan crisis of the 1980s and 1990s.