Debate Pledged To Begin Soon On Financial Bill
LINDA WERTHEIMER, host:
This is MORNING EDITION from NPR News. I'm Linda Wertheimer.
RENEE MONTAGNE, host:
And I'm Renee Montagne.
Eighteen months after the meltdown on Wall Street, and Congress is still trying to pass new, tougher regulations for the financial services industry. The head of the Senate Banking Committee, Christopher Dodd, yesterday released the bill he'll be promoting. That bill comes after a House bill that's already been passed, and it doesn't do everything that House bill would do.
NPR's Audie Cornish reports.
AUDIE CORNISH: First of all, Dodd says he doesn't have the votes for the proposed stand-alone consumer financial protection agency called for by both the Obama administration and the House bill passed last fall. The Connecticut Democrat wants to put a bureau with a similar title under the Federal Reserve.
Representative CHRISTOPHER DODD (Democrat, Connecticut; Chairman, Senate Banking Committee): I know there's been a lot of attention paid to which building this new watchdog will be housed in. That's not the important part, let me say. The important part is that the consumer protection watchdog has the independence and the authority it needs to get the job done.
CORNISH: Under Dodd's proposal, the consumer bureau would not be headed by the chairman for the Fed. It would have its own boss, budget and authority to write rules for mortgages, payday lenders and other consumer credit. But when it comes to enforcing those rules, the bureau would share some of that job with banking regulators. In fact, a council of banking regulators could veto a consumer rule if they think it would hurt banks.
Consumer advocates like John Taylor of the National Community Reinvestment Coalition have a big problem with that.
Mr. JOHN TAYLOR (National Community Reinvestment Coalition): What they've essentially done is said you guys are terrible. You guys failed. You guys dropped the ball. You didn't protect consumers. Oh, and by the way, we're now going to put all the consumer protections under you. It doesn't make any sense.
CORNISH: After all, last November, Senator Dodd called the Federal Reserve an abysmal failure at consumer protection, but things have changed.
Rep. DODD: Well, again, I've never - I know there were those - this notion of being punitive or - and so forth with the Fed. I, again, as I've said in this statement here, I - legislating in anger doesn't seem to me to get you very far.
CORNISH: Dodd's original proposal actually sought to strip the Fed of most of its supervisory powers, but this version actually adds new responsibilities over the largest financial firms. The proposal would give the central bank a seat on the new committee of regulators called the Financial Stability Oversight Council.
This council would be charged with watching firms for signs they're posing a risk to the financial system, and it would empower the Fed to impose stricter requirements on such companies, or even break them up. Meanwhile, the bill tries to avoid future bailouts by having the largest firms pay up front into a fund for crisis situations.
But John Dearie of the Financial Services Forum says instead, the government should impose a tax or fee at the time of liquidation.
Mr. JOHN DEARIE (Financial Services Forum): You know, here we at a period where we're trying to find every way to encourage bank lending, so taking either $50 or, in the House bill, $150 billion of capital out of the banking system, that money can serve to support, you know, 10 to 12 times that amount in lending.
CORNISH: This is the second draft bill in six months from Senator Dodd. Republicans panned the first, and after weeks of bipartisan talks, this version hasn't exactly drawn any endorsements.
Meanwhile, some Democrats are concerned the bill is too lenient in some areas. But lawmakers on both sides of the aisle say they're ready and willing to propose their own suggestions and take this discussion to the Senate floor.
Audie Cornish, NPR News, the Capitol.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.