Highlights from Financial Reform

As you probably heard, the financial reform bill emerged from the conference committee on Friday, newly reconciled between the House and Senate versions. The plan now is to have the president sign the bill on the Fourth of July.

We'll have a full report on how this legislation will affect your financial interests, as well as how it will affect the larger economy, on the Echelon Wealth Strategies website in the next few days. In the meantime, here are some highlights:

* The so-called Volcker Rule survived in somewhat weakened form. Banks are prohibited from investing depositors' taxpayer-insured money in proprietary trading schemes. They are still able to invest up to three percent of what's known as tier I capital in private equity and hedge funds.

* Mortgage lenders are required to hold onto 5 percent of all the mortgages they issue, in hopes of preventing them from issuing risky, subprime motrgages we saw during the housing bubble. Loans to high-quality borrowers are exempt from this rule.

* The Consumer Financial Protection Bureau will be put under the control of the Federal Reserve, although the director is technically independent.

* The decision as to whether to force brokers to follow a fiduciary standard - to be required to always put their clients' needs ahead of their own - was put off until there could be further study on the issue from the SEC. This is unfortunate. Wealth managers such as myself are pledged to follow their fiduciary duty, and brokers should too.