Dodd to Unveil Wall Street Reform

On Monday, Sen. Chris Dodd (D-CT), Chairman of the Senate Banking Committee, is set to unveil what is expected to be the most sweeping financial reforms proposed in decades, but the reforms may not have the votes necessary to pass.

Last week Dodd announced that after months of exhaustive negotiations with Republicans, he would introduce a bill himself, believing that the window for passing broad financial reform was quickly coming to a close.

"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," Dodd said in a statement.

Dodd’s decision, however, could jeopardize the bill’s chances of passing the upper chamber.  Democrats would need the support of at least one Republican to clear a procedural hurdle and bring the bill to the full chamber for a vote. 

Perhaps the most controversial aspect of the bill is the proposed creation of the a Consumer Protection Agency, which would be charged with regulating financial firms that issue consumer credit such as credit cards and mortgages.  Many believe such an agency is necessary in the wake of the financial crisis that begin when thousands of mortgages that probably should have never been issued in the first place went belly up. 

While the idea has not garnered much support on the right, liberals may not be happy in the end, either.  The New York Times reports that the agency would likely be housed in the Federal Reserve, with its director appointed by the president and confirmed by the Senate.  Some on the left feel that the Fed did a very poor job of monitoring the financial markets in the lead up to the crash and believe that housing the CPA in the Fed would effectively neuter it.

Another aspect of the bill will allow the federal government to more quickly wind down struggling financial institutions deemed to be “too big to fail.”  Many experts believe that the government’s helplessness in the face of collapsing financial institutions contributed to the severity of the recession. 

In addition to the Federal Reserve’s increased regulatory role, the Federal Deposit Insurance Corporation would be charged with more closely regulating smaller, state-chartered banks. 

The bill would also create a systemic risk council headed by the Treasury Department.  That group would be charged with identifying and fixing major risks to the nation’s financial health, such as the millions of toxic assets banks held on their books when the crisis began, forcing the government to step in and save them before it was too late.  In addition, the bill will likely seek to make derivatives trading more transparent.

"Despite the work of the past several weeks, the bill that will be introduced on Monday will unfortunately not be done so in bipartisan way," Sen. Bob Corker (D-TN), who had been Dodd’s main negotiating partner, said in a statement. "Sadly, I fear that in order to pass their health care bill, this administration is willing to crowd out every other important issue our country faces and financial regulatory reform bill may be the latest casualty."