Economy Watch: U.S. Senate Passes Financial Reform

Now the matter goes to a House-Senate conference committee to reconcile the two versions. The U.S. House passed its version late last year.

May 21, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user Rob Crawley

Late on Thursday the U.S. Senate passed its version of landmark legislation aimed at overhauling the way U.S. financial markets go about their business by a vote of 59 to 39, with a handful of Republicans joining the Democratic majority. Now the matter goes to a House-Senate conference committee to reconcile the two versions. The U.S. House passed its version late last year.

As to be expected from this kind of bill, it’s phone-book sized (1,500-plus pages) and covers a lot of ground. It would, among other things, create a new consumer protection agency, change the regulatory environment for mortgages and credit cards, and fashion a system to manage the collapse of financial institutions, especially those “too big to fail.”

Though it seems like a dead letter anyway, tucked away in both versions of the bill is the elimination of the “stated-income loan” that had some vogue back in the mid-2000s among mortgage lenders and borrowers. In other words, borrowers would need to offer some kind of documentation of their income to get a mortgage, in case the unimaginable day comes again when lenders are tempted to skip the whole “verification of income” process.

Movie Gallery Rides Off Into the Sunset

A federal bankruptcy judge in Richmond, Va., signed off on the demise of Movie Gallery Inc., this week. The company operates under the Movie Gallery name, but also as Hollywood Video, which it bought in 2005, and Game Crazy. There are still more than 1,000 total locations of these three brands, but they will all be closed by the end of this summer.

According to the bankruptcy filing, the Wilsonville, Ore.-based Movie Gallery had debts of as much as $1 billion, but assets totaling only about $50 million, presumably including copies of The Adventures of Pluto Nash that no one wants.

The company went through bankruptcy before, in 2007, but that time it reorganized and shed a lot of the debt from the Hollywood Video acquisition. This time around, however, market forces–Netflix, Redbox, video on demand–proved too hostile to the brick-and-mortar video model. Watch out, Blockbuster.

Not All Banks Are Recovering

Whatever the hubbub caused by financial industry reform within the financial industry, it seems that the industry is recovering. Except for the parts of it that aren’t.

The Federal Deposit Insurance Corp. said Thursday that the number of banks on its hush-hush “problem” list grew to 775 in the 1Q10, up from 702 during the previous quarter. Turns out that most of the nation’s larger banks are showing better numbers lately. Small and mid-sized banks, not so much, as sour real estate conditions continue to act as a drag on their performance.

Wall Street had a bad case of the jitters on Thursday, perhaps worried that Europe would bung things up for the rest of the world’s fragile economy. The Dow Jones Industrial Average dropped 376.36 points, or 3.6 percent; the index’s 2010 high thus far was on April 26, and Thursday’s drop to near 10,000 means that it’s off 10.15 percent from that high. The S&P 500 plunged 3.9 percent and the Nasdaq lost 4.11 percent.