Dodd Presents Senate Version of Financial Services Bill, Lacks Reverse Amendment

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.

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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

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  • Reva,

    What does “…to regulate nonblank financial companies” mean? I take it that “nonblank” should be “nonbank.” Is the term “nonbank financial companies” defined in the proposal?

    I hope the reverse mortgage amendment to the prior bill never makes it to the light of day. To require the head of this agency to have separate regulations on reverse mortgages in place in 12 months is ridiculous. If the agency determines that such regulations are needed and should be at that level of priority is fine but to legislatively require it is nonsense. Personally, there are many other projects that are severely more important and require immediate attention over the next 12 months.

    I guess the amendment authors believe they have a better idea of what is needed than the new head will. If Congress had considered GSE reforms in the first few years of the decade when they were first proposed, it is highly unlikely we would be in the mess we are in.

  • The Senate bill, once passed, must be reconciled with that already passed by the House, which is very different.

    The best way for Republicans, as the minority party, to have a greater voice in the legislation is to agree to vote for the final product if their major concerns are addressed. Otherwise, Democrats justifiably will have no incentive (or need, as the majority party) to pass a bipartisan measure.

    • Check the history of the Senate bill. A bipartisan bill was nearing completion in committee when Senator Dodd suddenly moved it into an all Democratic hearing. The Republicans spent hours and hours in working with the Democrats in reaching compromise, and then it was pulled. Who would blame the Republicans for voting against it as a block?

      Senator Dodd was headed into adding a stellar piece of legislation to his Senatorial career. His arrogant action will result in the negative reaction HIS legislation so richly deserves.

      • This is symptomatic of the state of politics today. Everyone's objective is to gain political advantage – no longer the good of our country and its citizens.

        Unfortunately, Republicans refused to support the bipartisan bill that was nearing completion. Since the proposed legislation wasn't going to get any Republican committee members' votes, Senator Dodd and the Democrats decided to create a bill that incorporated their objectives.

        That bill still is a long way from becoming law. It must go to the floor for debate, where Republicans (and Democrats) again will have an opportunity to offer amendments. Remember, nothing can get through the Senate without at least one Republican vote (for cloture), so the final product will be bipartisan.

        Finally, the bill, once passed by the Senate, must be reconciled with the House version, which is different in several fundamental ways, not the least of which is the entity designated to house the new consumer financial protection agency.

        Historically, Congress routinely passed legislation that could be characterized as bipartisan. Beginning in 1994, more highly partisan candidates from both parties became elected, especially to the House, but more recently to the Senate as well. I blame this on two things: the abandonment of our two major political parties by moderate voters, and (in most states) the closed primary system, which guarantees the nomination of candidates with extreme views.

        In the past, Republicans and Democrats in Congress enjoyed close friendships while away from the Hill; today, they detest each other and are constantly scheming to undermine their colleagues, whom they view as opponents or, worse, enemies.

        The recent Supreme Court decision that overturns campaign finance reform will not improve the situation, I'm afraid.

      • HECM_Dude,

        The game of politics is very convoluted. As one Congressional is credited with saying: “Republican members are our opponents; the Senate, our enemy.”

        In my view a poorly written bill is worse than none at all. We need a true bipartisan bill. Where are our statesmen? It is time that some stand up to the tide. I want a bill passed and if it takes a year to do, so be it. I know the Democrats promote what you are presenting but not the Republicans. It was sad to see Senator Dodd “pull the trigger.” The current trend is like playing Russian roulette with only one potential target, our children and grandchildren. It certainly is not the making of sausage, not anymore.

  • HECM_Dude,rnrnThe game of politics is very convoluted. As one Congressional member is credited with saying: “Republican members are our opponents; the Senate, our enemy.”rnrnIn my view a poorly written bill is worse than none at all. We need a true bipartisan bill. Where are our statesmen? It is time that some stand up to the tide. I want a bill passed and if it takes a year to do, so be it. I know the Democrats promote what you are presenting but not the Republicans. It was sad to see Senator Dodd u201cpull the trigger.u201d The current trend is like playing Russian roulette with only one potential target, our children and grandchildren. The legislative proceess certainly is no longer like the “making of sausage”, not anymore.rn

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