WASHINGTON (MarketWatch) -- President Barack Obama on Wednesday signed into law the most historic shakeup of the regulation of U.S. banks since the Great Depression, placing new fees and limits on the nation's biggest banks, imposing new restrictions on the $450 trillion derivatives market, and crafting a major new consumer-protection division for mortgage and credit-card products.

"Financial reform is not just good for consumers; it is good for the economy," Obama said at a signing ceremony with dozens of Democratic lawmakers and consumer advocates in attendance. "Passing this bill was no easy task. To get there, we had to overcome the furious lobbying of an array of powerful interest groups and a partisan minority determined to block change."

The approval hands Obama a significant triumph in his effort to rein in Wall Street after the excesses that drove the economy to the brink of collapse in September 2008.

The new law, known as the Dodd-Frank Wall Street Reform and Consumer Protection Act, is named after the legislation's two key sponsors in the House and Senate, the Connecticut Democrat Sen. Christopher Dodd and Rep. Barney Frank, a Democrat from Massachusetts.

New regulations for credit-rating agencies, banks, hedge funds, buyout shops and the $450 trillion derivatives industry are expected to be huge undertakings that will take, in some cases, years to implement. However, the statute instructs regulators to adopt many of the rules quickly, in the next six to eighteen months.

The Securities and Exchange Commission, for example, is expected to be responsible for writing 95 rules, while the Federal Reserve would be required to conduct 54 rule makings, according to the package.

The 2,323-page legislation requires a brand new financial stability oversight council to work with the Fed to have "too big to fail" banks install new heightened capital and leverage limits; it instructs the government to conduct unprecedented, ongoing audits of the central bank's lending programs; and sets up a tough "Volcker Rule" that seeks to limit insured big banks' speculative proprietary-trading activities.

It also will force big banks to mostly divest their hedge-fund and private-equity units over a number of years and establishes a new system to dismantle a failing Lehman-like megabank so its failure doesn't send the markets into a death spiral. Read about the 'Volcker Rule.'

In many cases, such as with big-bank capital and leverage restrictions, the Dodd-Frank Act gives regulators the final say rather than setting hard limits. It is unclear how tough the final law will be until regulators approve the hundreds of new rules required by the statute.

"U.S. financial regulators will enter an intense period of rulemaking ... and market participants will need to make strategic decisions in an environment of regulatory uncertainty," according to a Davis Polk report. "The legislation is complicated and contains substantial ambiguities, many of which will not be resolved until regulations are adopted."

Legislative observers contend that lawmakers were hesitant to impose specific limits on leverage and capital because they didn't want to put U.S. banks at a competitive disadvantage with banks in other major economies.

What's next?

Bank and securities regulators have already begin working behind the scenes on writing 243 rules ordered by the legislation, significantly more than the 16 rules and six studies required by the landmark, post-Enron, 2002 Sarbanes-Oxley Act.

The SEC, for example, is expected to approve a rule giving shareholders more power in director elections in August or September. The agency had proposed the rule in 2009 but was waiting for the measure to be approved in the bank statute before adopting it. The agency contends it already has the authority to adopt the rule but with statutory authority it is more likely to withstand judicial challenges.

The Government Accountability Office is charged to conduct a one-time audit of the Fed's emergency lending programs during the crisis with a report to be submitted to Congress within 12 months of enactment of the bill. The SEC has less than 12 months to adopt a rule requiring hedge fund and private equity managers to register and open up their books to periodic examinations at the agency. These alternative investment advisers need to be registered within 12 months.

New protections for whistleblowers must be approved by the SEC within nine months of enactment of the legislation, including new higher whistleblower payments. The agency needs in that timeframe to issue rules giving whistleblowers an ability to file lawsuits against employers who retaliate against them.

Some measures may take longer to create. The statute sets no start date for a new council of regulators, with ten voting members, which is being created to help set capital standards for big banks and monitor systemic risk. Depending on rules to be adopted by the Fed and other regulators, big banks could have between three and twelve years to divest significant interests their hedge funds and private equity unites.

The Treasury secretary and other bank regulators has roughly two months to set a date for the transfer of consumer protection regulations from existing bank agencies to a newly approved consumer financial protection agency. The new agency needs to essentially be set up within six to 12 months of enactment, but regulators could delay the agencies' formation by six months.

GOP opposition

Republicans expressed concern that the overall law would have the impact of driving derivatives and banking overseas, limiting access to credit in America, and hemming in job creation.

"When you cut through all the talking points about what financial regulation will do, the real long-term result will be job loss -- that's the real story here," said Senate Minority Leader Mitch McConnell of Kentucky on Wednesday. "This bill is no victory. Small-business owners aren't celebrating. The folks who lost those jobs aren't celebrating. It is this kind of uncertainty that will freeze credit."

Senate Majority Leader Harry Reid of Nevada argued, though, that something needed to be done. "We needed to do something because Wall Street hurt America," said Reid. "After the financial collapse, we've reined in Wall Street, and that's a cause to celebrate."

Sixty-seven studies

Lawmakers, in many cases, agreed to punt controversial sections of the bill and ordered studies on the subjects instead. The law requires bank and securities agencies to conduct 67 one-time studies, some of which call for regulators to take action and others that will disappear into the wind. Read about the studies.

With credit-rating agencies, bank capital and dozens of other key aspects of the law, Congress agreed to give regulators the final say instead of setting specific restrictions in statute. For example, bank regulators would have the authority to break up big banks but they won't be required to do so as many Democrats had sought.

Help for foreclosures

The package is expected to cost $19 billion, and it would include $3 billion in new funds to help unemployed homeowners avoid foreclosure and $1 billion to enable local governments to buy and rehabilitate foreclosed and abandoned properties and sell them to low and moderate-income buyers.

It sets up an independently funded Consumer Financial Protection Bureau, which would supervise and regulate mortgage and credit-card products, including payday lenders and others that have so far escaped regulation. However, lawmakers exempted auto dealers that make car loans from the new agency, despite opposition by consumer groups.

Too big to fail?

The law creates a system to dismantle a failing Lehman-like mega-bank so that its collapse doesn't unsettle the markets. Lawmakers agreed to an approach that would use taxpayer funds to unwind a failing institution and then recoup those costs from financial institutions after the fact. GOP critics warn the approach could cost taxpayers trillions of dollars.

The funds are expected to be used during an expanding financial crisis to cover a failing mega-bank's payouts to so-called solvent" institutions so they don't collapse as well. The soon-to-be-implemented statute also seeks to have the failing megafirm sell assets and uses the proceeds to cover taxpayer-expended funds.

New rules for derivatives

The statute imposes a major new regulatory regime to bring a huge swath of the $450 trillion derivatives market into the open.

Seeking to bring derivatives into the light, the statute requires a large chunk of derivatives transactions made by big banks, hedge funds and other groups to go through transparent clearinghouses, which are intermediaries between buyers and sellers of swaps. Derivatives traders, who have mostly conducted their transactions in the shadows, are also soon to be subject to new record-keeping and reporting requirements.

The law exempts many commercial end users of derivatives, such as airlines and manufacturers, from the clearinghouse requirement, when they hedge their commercial risks.

Weaker in the end

But in many ways the legislation is much weaker than it had been in previous incarnations.

The legislation gives the Federal Reserve and the new oversight council discretion over key aspects of the 'Volcker Rule,' allowing these regulators to decide just how much of a big bank's speculative propriety trading activities is permissible.

Legislators also watered-down a provision that would have required all big banks with more than $50 billion in assets to limit their debt to equity leverage at 15 to 1.

With respect to derivatives, the statute leaves a lot of discretion to the Commodity Futures Trading Commission and SEC to determine what derivatives users can be exempted from costly clearinghouses.

It also leaves a lot of discretion to regulators to decide how much capital big banks should put into separately capitalized affiliates they are expected to set up for some of their riskier derivatives business.

Legislators agreed to remove a provision that would have assessed a major fee on big banks to create a $150 billion fund used to dismantle a failing megabank. Instead, regulators agreed to use taxpayer dollars first and recover the funds afterwards.