According to Cady North, Manager of Government Affairs in FEI's Washington, DC office, "This new draft is substantially different from a House bill passed in December. There are several major sections in this bill including: the creation of a new Consumer Protection entity housed at the Federal reserve, resolution authority to help prevent situations where entities become systemically risky, executive compensation reforms including the ability for shareholders to take a “say on pay” vote, credit rating agency and hedge fund reforms, as well as regulation of the over-the-counter derivatives markets."
North notes that Chairman Dodd has been working on a bipartisan basis over the past few months on these significant reforms, but released a bill today without bipartisan support, noting “a few outstanding issues remain” and that he hopes the final package will ultimately have bipartisan consensus. The deadline for filing amendments will be Mar. 19, and consideration of amendments will begin quickly in committee on Monday, Mar. 22. Majority Leader Harry Reid has indicated he is hopeful this legislation could reach the Senate floor before Memorial Day, however, prolonged negotiations are expected.
A summary of the bill, prepared by the Senate Banking Committee, can be found here. Highlights pertaining to derivatives can be found in this FEI summary.
In his statement introducing the bill today, Dodd said: "It has always been my goal to produce a consensus package. And we have reached a point where bringing the bill to the full committee is the best course of action to achieve that end. I plan to hold a full committee markup the week of March 22nd. I have been fortunate to have a strong partner in Senator Corker, and my new proposal will reflect his input and the good work done by many of our colleagues as well. Our talks will continue, and it is still our hope to come to agreement on a strong bill all of the Senate can be proud to support very soon."
In response, Sen. Richard Shelby (R-AL), ranking Republican on the Senate Banking Committee, noted in his statement: “Republicans want to reach a bipartisan agreement with Chairman Dodd on substantive financial reform that protects taxpayers, strengthens our economy, and preserves the competitiveness of our financial markets. Over the coming days, my Republican Banking Committee colleagues and I will give Chairman Dodd’s proposal the serious consideration it deserves. Given the magnitude, complexity, and importance of this task, it is critical that we have sufficient time for a thorough review. This bill is 1,336 pages long. Forcing the Banking Committee to vote on this proposal in a single week is unrealistic and undercuts the potential for bipartisan agreement. Strong reform should not fear scrutiny.”
Consumer Financial Protection Bureau Would Be Housed In Federal Reserve
One of the more significant evolutions in the new version of the Senate bill introduced today, as shown in the Senate Banking Committee's summary, is that the Consumer Financial Protection Agency - renamed a Consumer Financial Protection Bureau (CFPB) - would not be an independent agency per se, but instead would be: "a new independent watchdog, housed at the Federal Reserve, with the authority to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, and protect them from hidden fees, abusive terms, and deceptive practices."
Some additional highlights regarding the CFPB:
- Led by an independent director appointed by the President and confirmed by the Senate.
- Dedicated budget paid by the Federal Reserve Board.
- Able to autonomously write rules for consumer protections governing all entities – banks and non-banks – offering consumer financial services or products.
- Authority to examine and enforce regulations for banks and credit unions with assets of over $10 billion and all mortgage-related businesses (lenders, servicers, mortgage brokers, and foreclosure scam operators) and large non-bank financial companies, such as large payday lenders, debt collectors, and consumer reporting agencies. Banks with assets of $10 billion or less will be examined by the appropriate bank regulator.
- Consolidates and strengthens consumer protection responsibilities currently handled by the Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation, Federal Reserve, National Credit Union Administration, and Federal Trade Commission.
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