Sen Dodd's bank super-cop may be doomed

Originally posted on Reuters.com. Click here to view original article.

Sat Feb 27, 2010 3:23am GMT
By Kevin Drawbaugh

WASHINGTON (Reuters) - A bold proposal by Senate Banking Committee Chairman Christopher Dodd to set up a single supervisor for U.S. banks looks doomed, said a source familiar with Senate committee discussions on Friday.

The Financial Institutions Regulatory Administration, which Dodd proposed in November, likely will not be included in revised legislation expected to be released next week by the committee, said the source, cautioning plans could change.

Instead, the Federal Reserve may keep its role as overseer of large bank holding companies, and the Comptroller of the Currency's office may remain in place, said the source.

At the same time, a document obtained by Reuters on Friday showed Dodd is circulating a plan to make President Barack Obama's proposed financial consumer watchdog a division of the Treasury Department, rather than an independent agency.

The document, said by a financial industry source to have originated from Dodd's office, proposed renaming the watchdog the Bureau of Financial Protection, giving it a presidentially appointed director, a dedicated budget, rule-writing authority and wide powers.

Dodd's office could not be reached immediately to comment on the document.

Obama in mid-2009 proposed an independent U.S. Consumer Financial Protection Agency to regulate mortgages, credit cards and other financial products. But it ran into stiff resistance from Republicans and lobbyists for banks and Wall Street.

In recent weeks, Dodd has discussed a range of possible compromises on the watchdog proposal. The Bureau of Financial Protection approach has yet to win support of Republicans, said a financial services industry source close to Senate talks.

Both developments -- on the banking supervision agency and the consumer watchdog -- could mark turning points in the Senate's long discussions about regulatory reform following the worst U.S. financial crisis since the 1930s.

If the Financial Institutions Regulatory Administration that Dodd proposed is dropped, the bill he hopes to bring to the Senate floor soon would more closely align with one approved in December by the U.S. House of Representatives, simplifying House-Senate reconciliation of their measures.

But abandoning the FIRA would also mark a retreat from an ambitious plan to consolidate a patchwork of bank regulators that was widely criticized after the crisis for gaps in oversight and narrowness of vision in monitoring the industry.

The FIRA would have streamlined the bank oversight duties of the Fed, the Comptroller, the Federal Deposit Insurance Corp, and other now separate agencies.

The Fed in recent weeks has pushed hard to preserve its role as supervisor of the nation's largest bank holding companies such as Citigroup (C.N) and Bank of America (BAC.N).

As plans stand now, the Fed may keep that job, but be stripped of its supervision of state-chartered banks in the Fed system. Responsibility for those banks would shift to the FDIC, which already examines many other state-chartered banks that are not in the Fed system, the source said.

Dodd's plan for closing the Office of Thrift Supervision, which regulates thrift institutions, appears to be unchanged. The House bill calls for closing the OTS, as well.

Back to News & Press

White Papers

SAAS - Software As A Service

Processing Loan Applications Via the Internet

View All White Papers

Testimonials

Credit Central has been using EnCompass for more than a year and a half now. To begin with, the Compass staff was very helpful in converting our old data over to their real-time platform. The b...

David Terrell, Credit Central

Previously, we were running on a system that required a server at each location. Our branches had to run daily reports and forward to the home office where we consolidated them for management review....

Brad McClure, Central Financial Services

By moving to the Compass Kwik-App program, Kitch as been able gain an edge on competitors by electronically providing all necessary loan documents to our indirect dealers. Dealers love the fact that ...

Chet Kitch, Kitch Companies

View All Testimonials

Partners