In an attempt to overhaul the U.S financial system, Senator Chris Dodd (D-Conn.) has unveiled draft legislation that would bring major changes to the existing regulatory system. The proposal would create three new agencies while eliminating several others with the objective of monitoring bank practices and protecting consumers.
The 1,100 page draft bill offers more sweeping change than legislation that has recently been proposed by the White House and in the House of Representatives. Senator Dodd's proposal removes most of the Federal Reserve's banking oversight and consumer protection powers, leaving it the primarily in charge of monetary policy. Additionally, the bill calls for the establishment of a "Super Regulator" to oversee all banks. This new agency, called the Financial Institutions Regulatory Administration, would absorb the Office of the Comptroller of the Currency and the Office of Thrift Supervision. It would also assume banking oversight powers currently held by the Federal Reserve and the Federal Deposit of Insurance Corp.
The idea of a single banking regulator is sure to be controversial. In fact, the American Bankers Association has already voiced its opposition, citing the failure of a similar system in Great Britain. Additionally, small community banks are opposed to a single banking regulator based system. As it stands, the FDIC works in conjunction with the states to regulate state-chartered banks. Under the new plan a special community banking division would be created within the super regulator, forcing the same agency to focus on both the largest and smallest banking institutions.
Senator Dodd's plan would also create an Agency for Financial Stability. Headed by a board of directors that includes the Treasury secretary, the Federal Reserve chairman and other top regulators, the stability agency would oversee financial practices that could potentially threaten the entire financial system. It would also be granted new powers to break up "too-big-to-fail" companies.
The bill's creation of a Consumer Financial Protection Agency is sure to be a sticking point with Republicans and big bank supporters. This agency would oversee bank products like mortgages and credit cards. A similar agency is included in the House of Representatives version of the bill and the opposition to this requirement has been fierce. In order to pass the House bill, exceptions to stronger rules were included for industries like auto dealers and title insurers.
As expected, the proposal would impose new restrictions on the troubled derivatives market and on credit rating agencies. It would also require hedge funds to register with the Securities and Exchange Commission. Additionally, the draft includes provisions that would reshape the way that the 12 regional Federal Reserve Boards are structured.
Senator Dodd's proposed legislation has a long way to go before consideration on the Senate floor. In fact, his draft proposal is already hitting roadblocks within his own committee. With such sweeping change to so many regulatory agencies and practices, it will be interesting to follow the progress or sudden death of this aggressive proposal. If the recent fireworks in the House of Representatives are any indication, it's sure to be a good show.
About the Author Reggie Britt is a consumer loan software developer for institutions serving the small loan customer. His Kwik-Loan software can help companies change their lending focus due to payday lending changes. Article Source: http://EzineArticles.com/?expert=Reggie_Britt |
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