US lawmakers hammer out historic Wall Street reform bill

US lawmakers on Friday hammered out a historic overhaul of financial regulations marking a major domestic policy gain for the Obama administration on the eve of a global summit of world leaders.

In a marathon session extending over 21 hours, congressional negotiators agreed to a rewrite of Wall Street rules that may crimp the industry's profits, subjecting it to stricter oversight and tighter restrictions.

The bill, which is being seen as the most wide ranging in scope since the 1930s, will be put up for final congressional approval next week. However, implementation may be bogged down for months over regulatory rule-making.

The legislation will establish a new financial consumer watchdog and set up a protocol for the dismantling of troubled financial firms and mandate higher bank capital standards, in a bid to ensure that the kind of credit crisis that hit the economy in 2007-2009 necessitating millions of dollars in taxpayer bailouts for floundering firms is not repeated.

To secure an agreement, lawmakers struck deals in the final hours on the most controversial sections, which restrict derivative dealings by banks and curb their proprietary trading to cover taxpayer-backed deposits from more risky activities.

Banks will be allowed to keep most swap dealings activity in-house, but the riskiest trading would be pushed out into an affiliate. Banks will also be permitted small investments in hedge funds and private equity funds.