Dodd pushes new plan to oversee banking institutions
Proposes merger as Senate redraws financial outlook
WASHINGTON - The senior Senate Democrat shepherding legislation to overhaul the nation’s financial system is planning to propose the merger of four bank agencies into one super-regulator, an idea that is significantly different from what President Obama envisions.
The legislation being prepared by Senator Chris Dodd of Connecticut, who heads the Senate Banking Committee, would also differ from the Obama plan by diminishing the role of the Federal Reserve as a systemwide overseer. Dodd’s plan is intended to be the starting point for the Senate as it redraws the financial landscape in response to the market crisis. For consumers, banks, and the markets, Dodd’s bill is expected to take on the same central role in the debate as Senator Max Baucus’s recent bill is to remaking the health care system.
“We clearly need to put in place an architecture that restores confidence and makes people feel that when they engage in financial activities, from making a bank deposit to buying insurance or investing in stock, that they can have confidence in the system,’’ Dodd said in an interview on Friday. “On the other side of this, I don’t want to strangle business.’’
In his weekly radio and Internet address yesterday, Obama again urged Congress to move swiftly to adopt legislation. He also accused lobbyists for the banks of being “hard at work trying to stop the reforms that would hold them accountable.’’
Lawmakers and aides say the bill Dodd is preparing to make public in the coming weeks would be more ambitious and politically risky than the plan offered by the White House, which considered but then decided against combining the four banking agencies - the Federal Reserve, the Office of Thrift Supervision, the Federal Deposit Insurance Corp., and the Comptroller of the Currency - into one superagency.
The White House backed away from that plan to avoid a phalanx of industry opposition that might slow Congress. In the House, Representative Barney Frank, Democrat of Newton, the chairman of the Financial Services Committee, has been working on legislation that is closer to the Obama plan on consolidation of the agencies.
The Dodd plan is certain to run into sharp resistance from banking industry lobbyists, who have already been urging lawmakers to defeat it even before it is formally introduced. It will also probably face stiff opposition from bank regulators, who are protective of their turf and have already raised objections about the more modest Obama plan.
Dodd, who faces a difficult reelection campaign in Connecticut partly because of the perception that he is cozy with the financial services industry, decided two weeks ago to remain chairman of the banking committee rather than succeed his close friend, the late Senator Edward M. Kennedy, as head of the health committee. Senior Democrats in Congress say Dodd may have to thread a needle as he publicly takes on the financial services industry - whose members have a heavy presence in Connecticut and are some of his biggest campaign contributors - while trying to project an image of independence from it to get re-elected. But as chairman, he may also have to make compromises with industry lobbyists to move the legislation through a chamber in which bankers hold political sway.
Dodd said he decided to remain chairman after conversations with the senior committee Republican, Senator Richard Shelby of Alabama. He said Shelby convinced him that it would be possible to get bipartisan support for stronger financial regulation despite major disagreements between even the two senators. The industry has important allies among Democrats and Republicans on the banking committee. Industry lobbyists and colleagues said, for instance, that several Democrats were likely to oppose the Dodd plan to have one banking agency, a change that has been advocated by Senator Charles E. Schumer, Democrat of New York, and Senator Mark Warner, Democrat of Virginia.
Dodd and Shelby agree generally on some issues - including their skepticism of a more powerful Federal Reserve, reflecting a view shared widely among lawmakers. But among their disagreements are whether to have a new consumer financial protection agency that would regulate credit cards, mortgages and other loans. The Dodd plan would reduce the stature of the Federal Reserve in several ways. The central bank, which has evolved since its creation nearly a century ago into a powerful banking regulator and has gained even greater power over the last year, would lose authority over banks, as well as its ability to regulate mortgages and credit cards.
Dodd has also rejected the administration’s proposal to give more authority to the Fed to play the leading role as a so-called “systemic risk’’ regulator that examines the connections between regulated and unregulated companies for trouble spots that could disrupt the markets. That role would instead be placed in the hands of a council of regulators.