US House formulates new lending and credit rules

The US House yesterday voted for the formation of a new borrower protection agency and gives the government sweeping powers to crack down on unethical Wall Street practices that caused last year's economic meltdown.

The approval, which came after heated exchanges between the Democrats and the Republicans is seen as a crucial victory for president Barack Obama, who has made financial reform his election plank, alongside health care.

Obama called the vote an ''important step closer to necessary, comprehensive financial reform that will create clear rules of the road, consistent and systematic enforcement of those rules, and a stronger, more stable financial system with better protections for consumers and investors.''

"We are sending a clear message to Wall Street: The party is over," House speaker Nancy Pelosi said.

The proposed Consumer Financial Protection Agency would seek to avoid a repeat of the mortgage crisis by formulating new lending and credit rules.

It would also impose new regulations on hedge fund managers and the traders of complex securities called derivatives, and give the government power to wind down large, troubled firms whose collapse could endanger the entire financial system.