Obama Signs Overhaul of Financial System

President Obama signed a sweeping expansion of federal financial regulation on Wednesday, signaling perhaps the Democrats’ last major legislative victory before the midterm elections in November, which could recast the Congressional landscape.

The law subjects more financial companies to federal oversight and regulates many derivatives contracts while creating a consumer protection regulator and a panel to detect risks to the financial system.

A number of the details have been left for regulators to work out, inevitably setting off complicated tangles down the road that could last for years.

But “because of this law, the American people will never again be asked to foot the bill for Wall Street’s mistakes,” Mr. Obama said before signing the legislation. “There will be no more taxpayer-funded bailouts. Period.”

“If you’ve ever applied for a credit card, a student loan or a mortgage, you know the feeling of signing your name to pages of barely understandable fine print,” Mr. Obama said. “But what often happens as a result is that many Americans are caught by hidden fees and penalties, or saddled with loans they can’t afford.”

He said the law would crack down on abusive practices in the mortgage industry, simplifying contracts and ending hidden fees and penalties, “so folks know what they’re signing.”

The law expands federal banking and securities regulation from its focus on banks and public markets, subjecting a wider range of financial companies to government oversight.

It also imposes regulation for the first time on opaque markets like the enormous trade in credit derivatives.

It creates a council of federal regulators, led by the Treasury secretary, to coordinate the detection of risks to the financial system, and it provides new powers to constrain and even dismantle troubled companies.

And it creates a powerful regulator, to be appointed by the president and housed in the Federal Reserve, to protect consumers of financial products.

The first visible result may come in about two years, the deadline for the consumer regulator to create a simplified disclosure form for mortgage loans.