Mendelowitz said he was delighted with the reconciled bill, adding: “It’s a small provision in the bill. It’s almost gone unnoticed. There are a lot of easy flashpoints that have hooked the press. There’s about 90% of what was in the Reid bill. It’s not perfect, it’s still an incredible achievement.”

The most important proposal – the creation of a national database to store transaction data, accessible by regulators monitoring the build up of systemic risk – has made it into the bill. “All of that’s in there,” said Mendelowitz. “It’s mandatory for all financial institutions and instruments.”

Mendelowitz helped found Ce-Nif after the crisis, in February 2009. The group called for a new, independent body to collect and manage all transaction and position data for US financial entities and their affiliates.

The project was lent heavyweight backing by six Nobel Prize winners in economics, including Myron Scholes and Robert Engle.

Mendelowitz had previously called mandatory data monitoring “more important than anything else in the bill”, adding that he thought “the other provisions are worthless if your regulators are flying blind”.

“Anyone who looked at what happened in the crisis came to the unavoidable conclusion that the government lacked the data to know what was going on,” Mendelowitz said during the bill’s passage. “This is the key to understanding what happened.”

“Huge changes”

The new entity will be known as the Office of Financial Research, rather than the National Institute of Finance. It will spell huge changes for the over-the-counter derivatives market, which at present is under no uniform obligation for transaction reporting.

Asked which provisions he thought were most important, Mendelowitz said that a lack of blanket corporate exemptions was welcome. “A director can’t decide on who they want to collect data from,” he said. “Once you move out of the financial world, the Federal Reserve has to decide who’s eligible.”

Mendelowitz, a former chairman of the Federal Housing Finance Board (the agency responsible for regulating the Federal Home Loan Bank System), said the power of the association’s head was significant, adding: “The Treasury secretary can’t testify before Congress without Treasury approval. Our director can. Everything about this was structured to guarantee .”

The head of the monitoring agency will be appointed by the president and approved by the Senate, Mendelowitz said. Its budget would be “what’s needed”, he added, something which was now being discussed with the Treasury. “It’s going to be of the order of a national regulator,” he confirmed.

Throughout the legislative debate, Mendelowitz stressed that the body ought to be strongly independent and non-regulatory. He voiced concerns that the Treasury would attempt to weaken the legislation as the bill entered its final deliberations.

“It’s going to take a few years to work through,” he concluded. “But once standardised provisions are up and running, you’ll see huge changes. Banks know they’ll have to maintain their own separate databases. Traders won’t risk billions on broken trades owing to using different databases. They’ll be the beneficiaries of this once it’s up and running. It’ll lead to a stabilising of the financial system.”

And Mendelowitz said he did not think the industry would put up too much of a fight in response, saying: “I don’t foresee a problem with backlash. But the Office does have the power to enforce if there is. Subpoena power cannot be underestimated!”

Tom Osborn +44 207 779 8361 tosborn@fow.com