Why would the new financial regulation bill cause recent stock market declines? For several reasons. First, the stock market does not like uncertainties and the FINREG bill is definitely a bill that will have economic effects which will not be apparent until it has been in effect for at least a year, and maybe even a decade.
Second there is a perception, probably correct, that the FINREGs will have a bad effect on the income of banks. This perception, if it becomes reality, will have large effects on the economy. What effects? Well probably there will be less credit available to ordinary individual or small business customers for starters.
Third, the banks will have less capital to invest on business ventures of virtually every type. Because banks are presently a major source of capital for investment, a decline in available capital could have a devastating effect on business growth, GDP, and general quality of life for the average American.
Finally, bank accounts will have a higher cost to maintain for the average person. Many people could even decide they can't afford a checking account and withdraw millions if not billions of capital from the banks. This of course further reduces capital available for investment.
Does anyone still want FINREG to be signed into law? Write or call your congressman now!
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