Evans Liberal Politics
March 15, 2010
New Senate Bill to Toughen Stance on Banks
WASHINGTON — Senate Banking Committee Chairman Christopher Dodd (D., Conn.) is finalizing a bill to rework financial market rules that is expected to be tougher against banks than previously expected, people familiar with the matter said.
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Though details of the bill could still change before it is introduced Monday, some details emerged Saturday as aides and White House officials conferred.
The biggest winner in the bill appears to be the Federal Reserve, which would see its powers expand considerably. Large financial companies, particularly big banks, could emerge as the biggest losers. They would face much higher scrutiny from bank supervisors and potentially face sanctions for violating consumer protection rules by an autonomous new division within the Fed.
Big banks could also be forced to comply with certain state consumer protection rules, a move that would be considered a huge win for consumer advocates and a blow to a financial industry that had lobbied against such a move.
The bill’s ultimate prospects are still cloudy. No Republicans are expected to initially support it, though Democrats hope they can eventually win support.
Mr. Dodd has spent months negotiating the bill with multiple Republicans, first Sen. Richard Shelby of Alabama and later Sen. Bob Corker of Tennessee. Mr. Dodd eventually broke off negotiations with both lawmakers in succession, and announced Thursday he would forge ahead without Republican backing.
A central plank in the bill would give the government the power to seize and dismantle a large, failing financial company. This provision is intended to prevent the government from having to launch another ad hoc taxpayer-funded bailout, like the one that bailed out American International Group Inc. in late 2008. To pay for this power, the government is expected to require the largest financial companies to pay a combined $50 billion into a fund that one day could be used to arrest a failing company.
A key change in Mr. Dodd’s bill from just a few days ago is a provision giving the Federal Reserve, which appeared to be on political life support just a few months ago, the power to supervise any bank or financial company with more than $50 billion in assets. Treasury Department officials lobbied aggressively for this change. Treasury Secretary Timothy Geithner and Fed Chairman Ben Bernanke have argued the Fed should play a central role in bank supervision.
Even though this would appear to shrink the Fed’s authority from where it is today—the central banks examines more than 5,000 bank-holding companies of all sizes—the provision would still allow the Fed to have a primary presence in most of the U.S.’s largest financial institutions.
Read the full article, here.
See Breaking: Dodd Proposes Dramatic Shake-Up Of NY Fed, Daily Kos, March 15, 2010, by bobswern, excerpt quoted verbatim:
According to a breaking story in the New York Times, over the past hour, we’re learning that Senator Chris Dodd (D-CT) is proposing to put a saddle of historic proportions — as part and parcel of his Senate Banking, Housing and Urban Affairs Committee’s financial regulatory reform legislation — on Wall Street’s control of the New York Federal Reserve branch. (See: “With Nods to Both Sides, Dodd Will Introduce Bill.”)
Dodd is proposing to wrest control of the appointment of the head of the NY Fed from its member banks and make it a White House appointment, instead. Another rule being proposed in the latest draft of his committee’s financial regulatory reform legislation, to be unveiled tomorrow morning at 9:45AM, would prohibit member bank officers from sitting on the NY Fed’s board.














