WASHINGTON, July 21, 2010 (AFP) – President Barack Obama Wednesday signed into law the most sweeping reform of the US finance industry since the 1930s, promising US taxpayers would no longer get the bill for Wall Street excess.

The legislation, which some Republicans have pledged to repeal, introduces new consumer protections, checks the power of big banks and cracks down on deceptive practices by credit card firms.

US President Barack Obama speaks before signing the Dodd-Frank Wall Street Reform and Consumer Protection Act at the Ronald Reagan Building in Washington, DC, July 21, 2010. AFP PHOTO

“Because of this law, the American people will never again be asked to foot the bill for Wall Street’s mistakes. There will be no more tax-funded bailouts,” Obama promised.

Seeking to restore public confidence in his economic leadership as unemployment flirts with double digits, Obama said the bill would repair the fractures and abuses that produced the financial meltdown.

“It was a crisis born of a failure of responsibility, from certain corners of Wall Street to the halls of power in Washington,” said Obama, before adding the legacy-boosting law to his huge health care reform passed earlier this year.

“These reforms represent the strongest consumer financial protections in history,” Obama said, before signing the new law, passed by Congress last week.

“These protections will be enforced by a new consumer watchdog with just one job: looking out for people — not big banks, not lenders, not investment houses.”

The financial reform bill finally squeezed through Congress with just a handful of Republican votes, as the opposition party stuck with its policy of trying to block Obama’s ambitious reform program at all costs.

Republican leaders on Wednesday condemned the new law, saying it would crimp growth, and handcuff the might of America’s financial titans.

Republican National Committee chairman Michael Steele accused Obama of trying to convince “skeptical Americans that he is doing everything he can to lower unemployment.”

“President Obama has signed into law a 2,300-page behemoth that will saddle the business community with innumerable unintended consequences, tighter credit, and countless job-killing regulations,” Steele said.

Mike Pence, a leading Republican in the House of Representatives, said the bill would hugely expand government control of the private sector.

“We need to repeal this new big government program and replace it with common sense reform that protects taxpayers from bailouts,” he said, disputing Obama’s claims that the law would end the need for government rescues.

Obama is facing his lowest approval ratings yet in some polls, but the idea of cracking down on banks is popular with the public.

However, much of the financial reform bill, like the health care law, will take time to implement and so may not help his political plight for months.

For instance, it will be up to a year before a new Consumer Financial Protection Bureau is set up to protect American consumers from hidden fees and deceptive lending practices when they get a new mortgage or credit card.

It could be 18 months before new regulations emerge to stop banks from engaging in impermissible proprietary trading and investment in hedge funds under the Volcker rule, named after former Federal Reserve chief Paul Volcker.

In a bid to highlight the help the bill will grant to the middle class, Obama was joined at the signing ceremony by several Americans who suffered unfair treatment at the hands of credit card firms and banks.

The legislation closes loopholes in regulations and requires greater transparency and accountability for hedge funds, mortgage brokers and payday lenders, as well as arcane financial instruments called derivatives.

The measure has drawn praise but also skepticism from economists and analysts.

The bill “addresses a number of key weaknesses in the US financial regulatory structure that led to the financial meltdown in 2008 and early 2009,” said Brian Bethune at IHS Global Insight.

But Diane Swonk at Mesirow Financial warned that much of the impact is not known.

“We will have more regulators overseeing — but not necessarily averting — risk, and with a bill so large and undefined, we are likely to get more, in terms of unintended than intended consequences, going forward,” she said.

The law is likely to generate heated debate ahead of congressional elections in November as Republicans call for its reversal.

House Republican leader John Boehner said recently the law “ought to be repealed” and replaced with “common sense things that we should do to plug the holes in the regulatory system.”

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Source: SGGP