In the hope of averting another financial meltdown, the US senate has approved the most extensive overhaul of their financial sector since the 1930s.

In a vote of 59 to 39 the 1,500 page ‘Restoring American Financial Stability Act’ was passed but still needs to be reconciled and melded with a similar bill that the US House of Representatives passed back in December with a 223 to 202 vote. It can then be sent to Barack Obama for signing into law.

Designed to make order of the financial system the new and controversial legislation would:

Set up a new council covering ‘systemic risk’ to prevent companies becoming ‘too big to fail’ as well as identifying and preventing the formation of asset bubbles.

Form a new consumer protection division to target abusive business practices.

Allow the Federal Reserve to supervise the more complex and large companies so that the government can understand any risks posed to the economy.

Empower regulators to oversee the derivatives market and make all transactions go through third parties increasing transparency.

The Senate’s bill also requires the big banks to raise some $250 billion in extra capital as well as separating off their derivatives business.

The Senate Majority Leader, Senator Harry Reid (Nevada) said: "Simply, the American people are saying, 'you've got to protect us,' and we didn't back down from that, … When this bill becomes law, the joyride on Wall Street will come to a screeching halt." The Senator has helped many homeowners in Nevada in their dealings with the Bank of America.

The US President wants all this in place this year but has warned that the financial lobbyists will fight an ongoing rearguard action to either get the laws ditched or substantially watered down. But opponents of the bill believe this legislation to be an overreaction that will hamper any US recovery.

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