Obama signs biggest financial overhaul in generations (1st Lead)

Jul 21, 2010, 17:07 GMT

Washington - President Barack Obama on Wednesday signed into law the most sweeping overhaul of the US financial system since the Great Depression of the 1930s, capping a year-long effort to fix regulatory gaps that helped plunge the globe into crisis in 2008.

The signing marked a major domestic political victory for Obama, who said the landmark legislation would prevent another financial collapse, end taxpayer-funded bank bailouts and refocus attention on the plight of ordinary consumers.

The reforms aim to learn the lessons from the 2008 financial crisis that was 'born of a failure of responsibility from certain corners of Wall Street to the halls of power in Washington,' Obama said at a ceremony in Washington's Ronald Reagan Building.

The new law extends the government's watch into virtually all corners of the financial sector, including hedge funds and derivatives markets, and provides new powers for authorities to step into failing financial firms to help avoid an industry-wide collapse.

The bill also creates a new consumer financial protection agency with 'just one job: looking out for people - not big banks, not lenders, not investment houses,' Obama said. 'Thats not just good for consumers, that's good for the economy.'

Obama signed the bill into law after more than a year of tense debate among lawmakers, which was closely watched by European and developing countries that were severely affected by Wall Street's 2008 meltdown.

The collapse of US investment bank Lehman Brothers in September 2008 sparked a major financial crisis that helped drive the US and world economy into a deep recession.

The new law aims to prevent Wall Street banks from taking excessive risks that led to the crisis. Banks invested in complicated securitized mortgages that left them vulnerable to bankruptcy when the housing market began a downward spiral in mid-2007.

Most conservative US lawmakers opposed the legislation as costly and dangerous over-regulation of the financial industry. Wall Street and much of the US businesses community also sought to water-down the bill.

'Such a broad, sweeping bill epitomizes a law with unintended consequences that creates more uncertainty for American businesses,' Thomas Donohue, president of the US Chamber of Commerce, said in a statement.