Landmark financial reform bill signed in

United States President Barack Obama has signed the most sweeping set of financial rules since the Great Depression, kicking off an election-year fight to define how the law will be put into effect.

"This reform will help foster innovation, not hamper it," Obama said yesterday during a bill-signing ceremony.

"It is designed to make sure that everyone follows the same set of rules, so that firms compete on price and quality, not tricks and traps."

With his signature, Obama capped a year-long legislative struggle to draft and pass the measure spurred by the 2008 financial crisis that triggered the collapse of Lehman Brothers Holdings and dragged down Wall Street and the United States economy.

The law, named after its principal authors, Connecticut Senator Christopher Dodd and Massachusetts Representative Barney Frank, gives the Government new authority to unwind failing financial firms that may threaten the entire system, imposes new rules on derivatives markets and creates a consumer-protection agency at the Federal Reserve to monitor everything from home loans to credit cards.

Obama said the new rules would provide "the strongest consumer financial protections in history".

He vowed it would bring an end to taxpayer bailouts of financial firms and said adjustments to the regulation may have to be made along the way.

Treasury Department and other officials now begin writing the regulations that will give the framework for enforcing the law, a process that may take a year.

Democrats say they expect the bill - and the Republicans' almost unanimous opposition to it - will give them an issue to trumpet during their campaigns for the midterm elections, in which analysts from both parties say Obama's party is all but assured of losing seats in Congress.

Republican Senate candidates in Arkansas, Illinois, Iowa, Louisiana, Missouri and North Carolina all voted against the bill in either the House or the Senate, so Democrats expect to maintain the drumbeat until November.

Almost four out of five Americans surveyed in a Bloomberg National Poll this month say they have just a little or no confidence that the measure will prevent or significantly soften a future crisis.

More than three-quarters say they don't have much or any confidence that the proposal will make their savings and financial assets more secure.

Forty-seven per cent of those polled said the bill would do more to protect the financial industry than consumers.

For many of those with a stake in the final shape of the bill on Capitol Hill, the final policy implications will be determined in the coming months and years, says Lawrence Kaplan, an attorney at Paul Hastings Janofsky and Walker LLP.

Among those attending the ceremony were lawmakers, including Dodd and Frank, and business leaders, including Vikram Pandit, chief executive officer of Citigroup Robert Diamond, president of Barclays and Gerald Hassell, president of the Bank of New York. Even with the signing, criticism of the law from business groups continued.

"This is nothing more than a financial regulatory boondoggle," said US Chamber of Commerce chief executive Tom Donohue.

"It won't strengthen our capital markets, it won't jumpstart the economy, and it won't help create any new jobs except in government."

For the banking industry, the battle now shifts to the regulators, where an alphabet soup of federal agencies have been tasked with crafting the new rules mandated by Congress.

At the Commodity Futures Trading Commission, chairman Gary Gensler has convened 30 teams to construct a new regulatory system for the US$615 trillion ($865 trillion) over-the-counter derivatives market.

- BLOOMBERG