Senate Banking Committee Chairman Christopher Dodd said Wednesday that he favors the creation of a single regulator to oversee U.S. banks, calling the current system "an irrational system created by historical accident."
In an interview with NPR, Dodd said the Federal Reserve, the Office of Thrift Supervision, the Federal Deposit Insurance Corp. and the Comptroller of the Currency were created over decades, with little thought to how they would work together.
"Major financial institutions would shop around for either the regulator without regulations or one that doesn't enforce the ones they had, and so you ended up literally shopping," Dodd said.
Members of both parties have sought to streamline the system for more than 60 years, Dodd said, but the economic downturn has now created momentum for change.
President Obama has proposed creation of a Consumer Financial Protection Agency to strengthen regulation of banks and the markets. Under Obama's plan, banks would have to offer a "plain vanilla" mortgage and other financial products — a proposal that is very unpopular with some major banks.
The House Financial Services Committee is working on a bill that would address the concerns of the Obama administration, the financial community and consumers. The bill is not expected to include requirements for "plain vanilla" products.
While Dodd (D-CT) said he believes an overhaul of the financial regulatory system should include consumer protections, he sides with banks in their opposition to the "plain vanilla" products.
"The idea that we're going to promote one financial product over another makes me uneasy," he said.
Dodd said his job as the banking panel chairman is to provide support for a measure that will strengthen public confidence in the financial sector while inviting creativity and imagination. He said he had not yet prepared any language for an overhaul bill.