"The Senate version of financial regulation hits Wall Street harder than expected"

[ProSense]

The two measures, included in the Senate bill passed last week, take direct aim at some of the more risky -- and profitable -- parts of banks' business.

One proposal would require financial firms to spin off their trading desks that deal in derivatives.

The other -- dubbed the Volcker Rule for its proponent, former Federal Reserve Chairman Paul Volcker -- would ban banks from wagering with the firm's own money, what the industry calls "proprietary trading." Firms would also be restricted from investing in or sponsoring private-equity funds or hedge funds.

The restrictions, if included in the final bill, would hit bank profits.

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The Senate version of financial regulation hits Wall Street harder than expected, with some analysts estimating it could cut the profits of major financial institutions by roughly 20%.

Critics of a comparable bill that passed the House in December said the Senate version has fewer escape routes and exceptions that leave room for Wall Street firms to work around new restrictions on their riskiest activities.

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