McClatchy news service
WASHINGTON — Legislation to be unveiled today by Senate Banking Committee Chairman Christopher Dodd to overhaul the financial regulatory system is likely to be more modest than either the Obama administration’s proposal last summer or a plan Dodd tried to push last fall.
Dodd, a Connecticut Democrat, was set to release detailed legislation for the most sweeping overhaul of financial regulations since the Great Depression, which Democrats want to pass before the fall elections. Tightening federal oversight of the financial system is designed to prevent a repeat of the banking- system meltdown in 2008 and is a top priority of President Barack Obama.
Dodd’s proposal, which was still being drafted Sunday, is expected to abandon the stand-alone Consumer Financial Protection Agency that was proposed by Obama and was included in Dodd’s original plan as well as overhaul legislation passed by the House in December.
Instead, Dodd is likely to propose a new consumer agency, with a director appointed by the president and confirmed by the Senate, that would be housed within the Federal Reserve, according to an industry official closely following the issue. The agency would be an independent entity in the central bank, not reporting to the Fed board, but the agency’s decisions could be vetoed by a new council of financial regulators.
The Fed, which has authority to write consumer protection rules for the financial industry, has been sharply criticized for not doing more to stop subprime mortgages before they triggered the collapse of the housing market.
Republicans strongly oppose a stand-alone consumer agency, as does the financial industry and the U.S. Chamber of Commerce.
Dodd also is likely to back away from his controversial idea to create a single federal banking regulatory agency to replace the four main agencies that oversee the industry now. That plan, which went beyond the Obama administration’s proposal for a more modest consolidation and was strongly opposed by current banking regulators, failed to gain traction in the Senate.
Still, Dodd was set to propose a major overhaul of regulations that would expand the role of the Fed in overseeing the nation’s economy, including new oversight powers over large financial companies that are not banks.