After nearly three months of anticipation, Senate Banking Committee Chairman Christopher Dodd (D-CT) has finally introduced his version of the Financial Services Bill. However, the bill was introduced unilaterally, without Republican support.
Dodd’s version of the bill is long—1336 pages—and both detailed and expansive. It includes the Consumer Financial Protection Agency (CFPA) located within the Federal Reserve, the Volcker Rule, and creates an Office of Research and Analysis located within the Treasury Department—all pieces of the legislation that RMD has previously discussed.
However, the bill also has some new components. Among these, it includes raising the bar for the government and the FDIC to act to wind down a failing financial firm and creating a $50 billion industry-supported fund that could be tapped to help wind down failing companies.
The bill would also create a new nine member Financial Stability Oversight Council, chaired by the Treasury Secretary. The council would be responsible for “identifying, monitoring and addressing systemic risks posed by large, complex financial firms as well as products and activities that spread risk across firms.” It will be able to pass stringent rules to regulate large companies if it fears their size threatens the financial system of the US. This includes the ability, by a 2/3 vote, to require a company to divest some of their holdings, and also by a 2/3 vote, to regulate nonblank financial companies.
It is unclear as of yet whether the reverse mortgage amendment that was passed in the House of Representatives will make it into the bill. What is clear however is that the bill is unlikely to pass without a fight. Senate Republicans including Senator Bob Corker (R-TN), who spent many hours negotiating with Senator Dodd in the hopes of producing a bipartisan bill has already indicated the Republican party’s intention to propose amendments to many of the bill’s components.
The Senate Banking Committee is set to mark up the bill next week, with Senate Democrats aiming to pass the bill before the Memorial Day Break. However, given the shortened legislative calendar in a midterm election year, some expressed skepticism that the bill would be able to pass within that timeframe. Said Senator Richard Shelby (R-AL), “Forcing the Banking Committee to vote on this proposal in a single week is unrealistic and undercuts the potential for bipartisan agreement.”
Written by Reva Minkoff