Dodd Targets Large Banks In New Reform Bill
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A new bill seeking to increase consumer protections and address "too-big-to-fail" revealed Monday by the chairman of the Senate Banking Committee, Christopher Dodd, would give new controls to the Federal Reserve over non-bank financial firms, while maintaining much of the power that the Fed currently has over U.S. banks.
The new bill, which was first proposed as a consumer watchdog by President Barack Obama, would give power to enforce protection rules for consumers at banks with assets that exceed $10 billion, as well as mortgage-related businesses and some insurer and other nonbank financial firms.
The initial draft of the proposal was immediately rejected by Republicans in November. Efforts to bring a bipartisan bill to the Senate broke down earlier this month, after Dodd had been working with Republicans to find compromises.
If Democrats are unable to sway at least one Republican on the proposal, the bill will fall victim to a filibuster. 60 votes are needed for the bill to pass through the Senate, while the Democrats control 59 seats.
Dodd's bill would create a risk council that could allow the Fed to order the break-up of large financial firms that threaten the overall health of the economy and keep the financial system from plunging the nation into another recession in the future.
The threat of banks deemed too-big-to-fail was made apparent after the financial system needed to be bailed out with hundreds of billions of taxpayer dollars at the height of the economic meltdown. The new legislation would provide a new framework for dealing with these institutions.
To the surprise of many, the Volcker Rule, which seeks to limit banks from proprietary trading and investing in hedge funds and private equity funds, was included in the bill, but regulations will be developed only after a study by the Financial Stability Oversight Council.
"We don't have many days left to get this job done," Dodd said. "So there is a sense of urgency. We do need to act."
The Senate Banking Committee will debate the new bill next week, but with Republicans and banking lobbyists threatening to weaken and block the proposal, the push for reform may not emerge from the Senate.
A full summary of the Financial Reform Bill can be found here
The new bill, which was first proposed as a consumer watchdog by President Barack Obama, would give power to enforce protection rules for consumers at banks with assets that exceed $10 billion, as well as mortgage-related businesses and some insurer and other nonbank financial firms.
The initial draft of the proposal was immediately rejected by Republicans in November. Efforts to bring a bipartisan bill to the Senate broke down earlier this month, after Dodd had been working with Republicans to find compromises.
If Democrats are unable to sway at least one Republican on the proposal, the bill will fall victim to a filibuster. 60 votes are needed for the bill to pass through the Senate, while the Democrats control 59 seats.
Dodd's bill would create a risk council that could allow the Fed to order the break-up of large financial firms that threaten the overall health of the economy and keep the financial system from plunging the nation into another recession in the future.
The threat of banks deemed too-big-to-fail was made apparent after the financial system needed to be bailed out with hundreds of billions of taxpayer dollars at the height of the economic meltdown. The new legislation would provide a new framework for dealing with these institutions.
To the surprise of many, the Volcker Rule, which seeks to limit banks from proprietary trading and investing in hedge funds and private equity funds, was included in the bill, but regulations will be developed only after a study by the Financial Stability Oversight Council.
"We don't have many days left to get this job done," Dodd said. "So there is a sense of urgency. We do need to act."
The Senate Banking Committee will debate the new bill next week, but with Republicans and banking lobbyists threatening to weaken and block the proposal, the push for reform may not emerge from the Senate.
A full summary of the Financial Reform Bill can be found here
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