Well, the Senate finally voted last week, and from the headlines one might think it’s all over but the shouting and signing. Certainly that’s what the President implied when he said in his remarks on the May 20 vote that “Because of Wall Street reform, we’ll soon have in place the strongest consumer protections in history.” He further proclaimed that “the American people will never again be asked to foot the bill for Wall Street’s mistakes” and that “the kinds of complex, backroom deals that helped trigger the financial crisis will finally be brought to the light of day.”

But last week’s vote was only on the Senate bill that we’ve been reporting on all spring. This week begins the process of reconciliation with the version passed last December by the House of Representatives, which differs in several key ways. The final bill isn’t expected to be ready for the president’s signature until July.

The next six weeks, then, offer a lot of room for pressure from all sides. There are the constituents who keep faxing Congressional members’ offices, including some who are suing their brokers or the ratings agencies in the meantime. Then there are the hundreds of lobbyists working furiously on behalf of the financial industry. According to The Hill newspaper and Talking Points Memo.com, the committee hearings may even be televised, so you might want to stock  up on popcorn.

Whatever happens, as media from across the spectrum have noted, the final legislation will be the most far-reaching restructuring of our financial systems since its fundamentals were constructed in 1930.  “This is the most significant reform for consumer financial protection and reining in the casino economy that we have had in fifty years,” said Heather Booth, executive director of Americans for Financial Reform — a steering  group for a coalition of consumer groups, labor unions, community activities and senior citizens lobbying groups (including AARP) — in a conversation with finance writer Edmund Andrews.

Below is a quick progress report on financial reform: some matters still to be settled, some still hugely controversial, and others less so. No matter how it ends up, the bottom line is far-reaching change.

The grownups in the room. Both bills establish a Financial Services Oversight Council (FSOC), charged with keeping an eye on developments in the industry, looking for possible trouble spots. Got a bold new subsidiary that leverages your CD with life insurance from Singapore and splits risk with future student loans? Expect a call from these guys, according to Peter Grier of the Christian Science Monitor, who calls FSOC “a bureaucratic early-warning system.”  FSOC, which will  be chaired by the Treasury Secretary and will include regulators from the Federal Reserve Board, SEC, Commodity Futures Trading Commission, FDIC, FHFA, and the new Consumer Financial Protection Bureau, would be charged with identifying and responding to emerging risks throughout the financial system. It would even begin policing large bank holding companies and interconnected nonbank institutions whose collapse might pose a threat to the economy.

The bill’s summary notes that the council will be “able to approve, with a 2/3 vote, a Federal Reserve decision to require a large, complex company to divest some of its holdings if it poses a grave threat to the financial stability of the United States.” The inclusion of “interconnected nonbank institutions,” Grier adds, is crucial: “The council could drag, say, big insurance firms like AIG that otherwise would not be subject to the steely glare of Ben Bernanke into his sphere of influence. If that ever happens, the firms in question might not be too pleased.”

Both Grier and Andrews hailed the fact that there will definitely be a Consumer Financial Protection Agency, as we discussed last week, though the House bill envisioned a somewhat stronger entity independent of the Federal Reserve. Either way, noted Andrews,  “the new agency’s funding would be far more secure than it would be if came from annual congressional appropriations.   Instead, its money will come out of the Fed’s annual profits, and the Fed has very little latitude to quarrel about how much the agency’s director says the agency will need.”

Also definitely coming are leverage requirements. Daniel Inviglio reports at Atlantic.com that “Banks will have to retain at least a 5% interest in the assets they securitize, which could not be hedged” and that “additional information and disclosure about the securitized assets will also likely have to be provided to investors.” And hedge funds will almost definitely be required to come out of the shadows and register with the Fed, somewhat curbing the secrecy of the “shadow banking” system.

Ch-ch-ch-changes…. While the Senate did vote to rein in proprietary trading by banks (the kind meant exclusively for the bank’s bottom line), an amendment that would have made such trading illegal never came to a vote. Meanwhile, the provision that would largely eliminate the current dominance of ratings agencies, such as Standard & Poor’s, passed overwhelmingly in the Senate, but now has to face the far weaker recommendations in the House bill.

Look also for fevered debate over provisions dealing with derivatives, those complex instruments that draw their value from underlying assets. Some controversial provisions: one that would prohibit any federal assistance to participants in credit default swaps and one, favored by Commodity Futures Trading Commission chair Gary Gensler, that would actually void some questionable transactions. And who will be exempt from the new “exchanges” to be established in the derivatives market?

“The financial industry was confident that a provision that would force banks to spin off their derivatives businesses would be stripped out,” wrote the New York Times this week, ” but in the final rush to pass the bill, that did not happen.” Lobbyists are making themselves comfortable for the duration.  Worth watching closely.

Three cheers for the little guy? While efforts to cap the size of banks failed, the legislation imposes far greater costs on the largest financial institutions while giving more of a break to smaller community banks, as Noam Schreiber points out in the New Republic.

“The legislation imposes new mandates and regulations—like oversight by a soon-to-be-established consumer financial protection agency, as well as limits on fees for debit-card transactions—from which small and medium-sized banks are exempt.” Schreiber writes. “Other reforms—such as a bill Congress passed last year to limit hidden credit-card fees and make statements more transparent, and new restrictions on trading derivatives—would disproportionately dent profits at megabanks. These banks tend to have far bigger credit-card operations, and are the only bona fide derivatives dealers around.” Watch for more debate about whether the too-big-t0-fail prohibitions are strong enough, and whether hurting bank profits hurts the economy.

Many financial writers warn that the new regime does too little to curb some systemic problems. But none contest how substantial these changes are, and some are already mounting the barricades to protect them. Below, watch MSNBC’s Dylan Ratigan on four provisions he sees as essential to “restoring capitalism.”

We’ll be watching. Let us know what you think, and what questions we still need to be asking.

For additional coverage of the financial reform legislation, see “Wall Street Reform: What’s in This Bill? And What Isn’t?” and “What’s in That Wall Street Bill? Part Two.”

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