Bill lays out route map for Wall St

©Getty The US Capitol building: reform of the financial sector cleared its last big hurdle on Thursday more than a year after the legislative effort began

Passage of the financial regulation bill kickstarts another round of lobbying and argument over the new “rules of the road” for Wall Street, but it also ends much of the doubt that has stalked the biggest US banks for the past year.

Mitch McConnell, Republican leader in the Senate, said: “It’s just this type of uncertainty that will deter lending and freeze up credit.” Many of the banks agreed.

But officials were resisting the view that vast tracts of the new financial landscape remained unmapped owing to the number of studies and rule-writing that the legislation mandated.

“With passage we will have a clear sense of rules of the road”, said a senior official. “We have been holding daily meetings here at the Treasury focused on implementation questions ... setting out for ourselves timelines.”

Government officials also noted that the rules for lobbying were more tightly constrained after the bill becomes law – and were much more transparent. Bankers could continue to make their case but must do so within the confines of the law and with a public record of their meetings.

As soon as Barack Obama, president, signs the legislation a new “orderly liquidation” authority is available. Unlike the painful failure of Lehman Brothers, if one of the largest bank holding companies runs into trouble next week – and there is no suggestion that one will – the new powers would allow regulators to seize the company, stabilise it and then wind it down.

Within three months a new Financial Stability Oversight Council, comprising the main regulators and chaired by the Treasury secretary, must meet. The most closely watched decision of the council will be which companies are designated “systemically important”, a labelling that would lead to the imposition of higher capital standards and could be resisted by some of those on the fringe of inclusion.

In the next six months, new rules giving shareholders an advisory vote on executive pay will come into force. Within nine months, risk retention rules will be put into place.

Within a year, hedge funds will have to register with the Securities and Exchange Commission and a new Office of Financial Research will be established to advise the FSOC and examine risks bubbling up in the system. In the next 18 months, the Volcker Rule will come into force, with limits on banks’ activities.

There is a lot to be decided at these different milestones, with some latitude for individual regulators to slant the rules as they prefer. But the reform passed on Thursday is tougher than expected a year ago.

In June 2009 the Treasury unveiled its blueprint, which almost immediately looked set for watering down. In particular, a new Consumer Financial Protection Agency, proposed to regulate the sale of credit products such as mortgages, and a move to push most over-the-counter derivatives through clearing and on to public exchanges seemed likely to fail. Even though the Democrats lost the 60th seat in the Senate needed to force through legislation, and in spite of multimillion dollar lobbying efforts, that did not happen.

The mixture of events that helped produce this outcome is up for debate. Chris Dodd, the Senate banking committee chairman, and Barney Frank, chairman of the House financial services committee, could claim some credit.

But both acknowledge that there were outside factors: the dire unemployment numbers contrasting with profits for Wall Street, fraud charges against Goldman Sachs and an increased focus from US media all played a part.