The article notes that 60 percent of the United States’ economic activity is driven by consumer spending, and that households with these higher incomes account for about one-third of that. While spending among the affluent rose at this time last year, in harmony with the stock market, new fears about a double-dip recession, stock market volatility and the financial situation in Europe have led to a widespread retreat from the purchase of luxury items.

This development, however, should not suggest new tax cuts for the rich, a policy proven bankrupt during Republican administrations and bound to make our deficit even worse, a factor that in itself leads to a lack of consumer confidence and decreased spending.

The paradox of our current situation is at once poignant and tragic, “The worry, of course, is that consumers will stop spending because of their concerns about a slowdown, and that economic growth will slow because consumers have stopped spending.”

Yesterday, the stock market dropped by more than 200 points, and its future course remains very much in doubt.

The scope of President Obama’s influence on U.S. policy and legislation should now be widely viewed as greater than any President since FDR. The health care legislation on its own could represent the capstone for a President’s career, and combined with the stimulus, our President’s influence on U.S. policy will be cemented for years to come.

The bill basically brings our dated financial regulatory system up to speed. Previously, when most financial activity was confined to banks, the system was adequate. But with the growth of private investment funds, new unregulated lenders and opaque markets for financial instruments such as derivatives, it was was woefully dated.

The new bill expands banking and securities regulation, creates a council of federal regulators under the Treasury secretary to detect any systemic risks, and provides a consumer protection regulator in the Federal Reserve. It does not, however, go outside the current system but mainly expands existing powers. Calls to break up the major banks were rejected, one reason why Senator Russ Feingold provided the only Democratic “no” vote.

Much of the attention now will turn to implementation and the creation of rules to comply with the legislation. But the President deserves congratulations for a bill that no one thought would pass given the oversized influence of the banking lobby.

The article describes their typical arrangement: having consumers stop making credit card payments and contributing instead to an account they set up. Then, when the outstanding credit card balance has exploded, they try to come to a settlement with the credit card company.

The two major trade associations for the debt settlement industry are the United States Organizations for Bankruptcy Alternatives and the Association of Settlement Companies. Members encompass 250 companies with 425,000 customers, managing $11.7 billion in debt.

These organizations refuse to release their members’ names, because, as one industry critic puts it, it would become a “subpoena list.” Some estimate the effectiveness of debt settlement companies for their customers as one percent.

The debt settlement industry, meanwhile, has exploded because of the recession and lower- and lower-middle class customers are being taken advantage of. New regulations are coming – perhaps limiting debt settlement company fees to five percent of the amount of debt reduced – and the new consumer protection agency may have some positive effect as well.

Still, it’s a shame to see these vultures feeding off the plight of people who have already suffered enough.

The bill, sponsored by Chris Dodd, head of the Senate Banking Committee, represents another major accomplishment for President Obama and must now be reconciled with the House version which is widely similar.

This can only be viewed as a victory for the American people. Despite furious lobbying by the banking industry, and the now common Republican obstructionist tactics, the legislation was passed in a bi-partisan vote. The Republicans could no longer maintain a united front, and Senators Collins and Snowe of Maine, Charles Grassley of Iowa, and Scott Brown of Massachusetts voted in favor of the legislation.

Remaining areas of contention involve an exemption of the auto industry from the Consumer Protection Agency, a provision President Obama wishes to reverse, and the use of a bailout fund to wind down “too big to fail” companies so the taxpayers aren’t left to pick up the tab. Senator Blanche Lincoln also drafted a provision to force big banks to spin off their derivatives training into separate entities.

The reconciliation between the House and Senate will take place in a formal hearing, and the article notes it may be televised. That’s one show I’m looking forward to seeing!

The banks being investigated include Goldman Sachs, Morgan Stanley, UBS, Citigroup, Deutsche Bank, Credit Agricole and Merill Lynch. The ratings agencies are Standard and Poor’s, Fitch Ratings and Moody’s Investors.

The article goes on to observe that workers at the ratings agencies frequently became employees, at a much higher salary, of the banks they were evaluating. These employees then frequently interfaced with their former colleagues at the ratings firms.

Anyone who has an inkling about the power of networking in business relationships will immediately realize the meaning of this observation.

The article even describes a term in frequent use among investment bankers regarding this corrupt system. The bundling of mortgage securities for rating purposes was referred to as “ratings arbitrage.”

One wonders how effective Mr. Cuomo’s investigation will be in the long run. After the spotlight fades, won’t banks, Wall Street, etc., go back to their cozy ways? What real punishment will these investment banks receive? And, perhaps more poignantly, how much is Mr. Cuomo’s investigation based on real prosecution and how much on his future run for Governor?

We shall see.

The Republicans were faced with an untenable position after they were criticizing Goldman Sachs during an oversight hearing and then blocking any regulation of Wall Street. The Republicans’ hands were forced after Senator Olympia Snowe, Republican of Maine, hinted at her desire to proceed with the debate.

Of course, the Republicans will continue to throw everything they have (but the kitchen sink) to try and gum up the works, but it looks like strong public sentiment will eventually force them to yield. After the bill is approved by the Senate, it will then have to be reconciled with previous legislation passed by the House.

The Senate bill includes regulation of hedge funds and derivatives as well as creation of a consumer protection agency to prevent people from being swindled. Republicans object to this agency (don’t ask me why) as well as a $50 billion fund to be financed by banks in case there’s a need of a bailout in the future. It’s important to note that this provision does not condone bailouts and mandates total change of management and total loss to investors during the transition process.

Meanwhile, in Washington, Democrats pushed to schedule a procedural vote meant to test whether the Republicans would try to obstruct financial regulation themselves, on behalf of the Wall Street giants. Earlier indications of compromise seemed to fade as the bill draws closer to enactment.

Well, it seems like healthcare redux. The Republicans will do their best to play defense, but they need to hold on to every single vote to do so. This, at a time when bankers are hugely unpopular and as a crucial election draws near. Any residual advantage they may have accrued from criticizing healthcare could vanish if they are seen as doing the bidding of financial titans and their enormous salaries.

One of the main points of contention seems to be a $50 billion fund, compiled through bank contributions, to use in case of future crises. Both Obama and the Republicans oppose it. Another issue involves a plank inserted by Blanche Lincoln to spin off derivatives into separate divisions.

The bill also achieved its first bipartisan supporter in the person of Senator Charles Grassley who comes from a rural state with populist sentiments. He also happens to be up for election this November.

Meanwhile, a number of Republicans described a developing deal on the legislation based on deleting the proposed fund for future bailouts. Democrats described the deal as Republicans acceeding to their demands after a public outcry while Republican said it was based on acknowledgement of their issues.

Surprisingly, the head of the Agricultural Committee, the panel hearing the argument on derivatives, Senator Blanche Lincoln, was one of the bill’s more liberal supporters. She had previously been an obstacle for national health care but is facing opposition from the left in a coming primary.

These developments are encouraging. It seemed like we were doomed for the same clawing opposition from the Republicans as experienced during the health care debate , now with a 41st vote in Scott Brown to make matters worse. They could find flaws in any comprehensive legislation and would just try to amplify them to mislead the American people.

But now with a possibility of a deal, at least there’s some hope for progress.

The bill is taking place before the agricultural committee because derivatives, in their simplest form, provide insurance against the value of an investment or a commodity, e.g., agricultural futures. However, the more sophisticated derivatives are widely used to place a financial bet, similar to those placed against the housing market.

These derivatives are not traded openly, and this reform, proposed in the bill, is widely opposed by the banking industry because it would lead to competition, lower prices, and thus decreased profits.

Derivatives are not limited to Wall Street, and thus the lobbying storm the article observes. Manufacturers, airlines and other industries use derivatives as a sort of insurance to protect their assets.

It’s important to note that Blanche Lincoln is not the only Senator on the agricultural committee who has been compromised by Wall Street donations. So has the ranking Republican, Saxby Chambliss, Kent Conrad and Charles Grassley.

This put Goldman into the situation of hoping the investment, consisting of mortgage securities, would fail while at the same time suggesting it as a worthwhile product for its clients. That’s known as fraud.

It is refreshing, for a change, to see Wall Street held accountable for its part in the collapse of the housing market. Goldman Sachs, of course, vehemently denies any wrongdoing.

The numbers involved in the deception are staggering. European banks, pension funds and insurance companies, to whom Goldman promoted the mortgage securities, lost most than $1 billion.  Meanwhile, John Paulson, who created Abacus at the bequest of Paulson, made $3.7 billion by betting against it.

Goldman had purposefully chosen securities that it felt were much weaker than their ratings to include in Abacus.

It’s hard to see how Goldman Sachs will come out of this situation with its reputation intact. Since the suit was filed, they have already lost more than 10 percent of their stock value, closing at $160.70 per share, at a loss of more than $10 billion of the company’s value.

The denouement of this situation will be interesting to observe as well as any further suits brought by the S.E.C.