The historic financial regulatory overhaul, not surprisingly, passed the U.S. House of Representatives on Friday. However, the fate of this reform is hardly sealed and the package is
still faced with three exacting challenges if not insurmountable obstacles.
POLITICAL HURDLE
Although President Barack Obama has pledged to lead the country in a bipartisan way to materialize his promised change, the political reality in Washington tends to dent his will.
Passed by a vote of 223-202, the bill received no support from the Republican lawmakers, who were joined by 27 of the Democratic legislators to vote against the legislation designed to address the loopholes that led to the country's worst financial crisis since the Great Depression of the 1930s.
Obama admitted after the House vote: "The crisis from which we are still recovering was born not only of failure on Wall Street, but also in Washington."
His team is taking pains to drive through the House other reform bills concerning Medicare, climate change, energy efficiency and education.
The combination of these factors, plus an economy that is still poised for a rocky recovery, has made Obama's charisma as a "cenebrity president" appear to be tarnished, some experts say.
"I am concerned because reforms in this case need both financial capital and political capital," said Harry Harding, public policy professor at the Virginia University.
"The political capital of the Obama administration is declining as a result of the lack of a healthy economy and the consciousness of tax," Harding told Xinhua.
"The financial ability of the U.S. government to take on these burdens
given by our very high debt increased by the stimulus measures is also constrained. I do worry he (Obama) has taken on way too much relative to his political capital and financial capital available to him," the scholar added.
IMPLEMENTATION HURDLE
Critics of the new legislation argue that it not only would create more regulatory bureaucracy but also might give rise to over-regulation, as the bill, known as The Wall Street Reform and Consumer Protection Act, would expand the government's power to break up companies that threaten the economy, and create a Consumer Financial Protection Agency to oversee
consumer banking transactions.
Hal S. Scott, professor of international financial systems at Harvard Law School and director of the Committee on Capital Markets Regulation, questioned the role of a systemic regulator to be created by the financial
overhaul.
He said the principal assumption underlying the financial regulatory reform legislation is that certain financial institutions are "too big to fail" because of the severe consequences of their "interconnectedness."
It would then turn out that there are no severe consequences to the financial system resulting from "interconnectedness." Subsequently, there is no substantial solution to the "too big to fail" problem.
"Do we really need to control the risk of large financial institutions by imposing heightened capital or new liquidity requirements?" Scott asked.
Bankers believe that the cost incurred from the Consumer Financial Protection Agency and the new regulatory rules will finally be transferred
back to the consumers themselves.
COORDINATION HURDLE
Some economists doubt the effectiveness of the new regulation which
they view as more domestically focused than it should have a global perspective, because the ongoing financial crisis is rather globalized.
The Federal Reserve has been criticized for keeping its key interest rate at historical lows for too long to make the United States itself a bubble maker in the world, though Fed chairman Ben Bernanke argued back recently that preventing asset bubbles in other parts of the world was not the responsibility of his institution.
In an article co-authored by British Prime Minister Gordon Brown and French President Nicolas Sarkozy, which was published on the Wall Street Journal on Thursday, the two European leaders called for a global regulation.
"This crisis has made us recognize that we are now in an economy which is no longer national but global, so financial standards must also be global," they said. "It is clear the action that must be taken must be at a global level."
"We need to enhance coordination at the global level so that foreign exchange volatility does not create a risk to the recovery."