Senator Chris Dodd & Financial Reform

Senator Chris Dodd has introduced a massive bill on financial regulation reform. It is over 1100 pages and attached to this post. Below is a reprint from the summary of the major regulation bodies structure overhaul:

The Financial Institutions Regulatory Administration

  • Independent: Headed by an independent chairman appointed by the President and confirmed by the Senate, a Vice Chairman experienced in state banking regulation, and a board including the chairmen of the FDIC and the Federal Reserve and two other independent members. It will be funded primarily
    by assessments on the industry.
  • Single Focused Agency: Combines the functions of the Office of the Comptroller of the Currency and the Office of Thrift Savings, the state bank supervisory functions of the Federal Deposit Insurance Corporation and the Federal Reserve, and the bank holding company supervision authority from the
    Federal Reserve.
  • Dual Banking System: Preserves the dual banking system, leaving in place the state banking system that governs most of our nation’s community banks.
  • Separate Community Bank Division: Establishes a separate division within the new regulator to
    regulate community banks given the different supervisory issues they pose.
  • Eliminates Charter Shopping: Stops financial institutions from choosing the easiest regulator, and stops fee-funded regulators from going easy on those they regulate to keep their business.
  • Increases Accountability: Having a single regulator will mean an identifiable agency is held
    responsible for shortcomings in the banking system.
  • Speeds Action, Increases Efficiency: Ends slow, cumbersome, coordinated rulemaking that creates extra red tape and inconsistent enforcement of the same rules by agencies. Overlaps impose unnecessary costs on regulated institutions and their customers.
  • Focuses the FDIC and the Federal Reserve: The FDIC will focus on its jobs as deposit insurer and resolver of failed institutions, retaining backup examination authority over troubled banks and gaining additional authority to accompany the new agency on examinations of healthy banks and holding companies to ensure it has sufficient information to perform its insurance functions. The Federal Reserve will focus on monetary policy without being distracted by responsibilities for bank oversight and consumer protections. The Federal Reserve will continue to play a key role in assessing financial stability and have guaranteed access to financial institutions and any needed information.

There is also a national office of insurance created.

Office of National Insurance: Creates a new office within the Treasury Department to monitor the insurance industry, coordinate international insurance issues, and requires a study on ways to modernize insurance regulation and provide Congress with recommendations.

The bill also strips away the joke of a consumer protection from the Federal Reserve and puts it clearly under the charter of the Consumer Financial Protection Agency (the CFPA is under attack by the U.S. Chamber of Commerce and their legislative puppets).

Consumer Protections in One Place: Consolidates consumer protection responsibilities currently handled by the Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation, the Federal Reserve, the National Credit Union Administration, and the Federal Trade Commission.

Not mentioned in the summary, but Sections 1201-1204 in the legislative text change the Federal Reserve's Emergency Lending Authority. It requires transparency, a list of recipients, justifications for emergency lending. (p. 1125). A later provision allows a year delay in who the emergency lending recipient was. Recall we still have no idea who received $2 trillion in emergency Federal Reserve lending, despite Bloomberg's FOIA requests.

The structure of Federal Reserve Board of Governors is changed to have the regional Fed. directors be chosen by the Board of Governors instead of Commercial Banks. (p. 1127) Seemingly it stops at the Regional Fed. Bank Presidents, so hopefully we will see a flow chart on the new Fed. organization.

The bill has more tightening on derivatives than the House's drive a truck through it loophole, exempting most firms from disclosure and collateral requirements. Gee wiz, derivatives are the most cited thing in the financial economic Armageddon, so Dodd's bill is a huge improvement.

A draft bill proposed today by Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, doesn’t match legislation in the House of Representatives that exempts most end-users from proposed rules reining in the $592 trillion over- the-counter derivatives market. Dodd’s bill more closely follows an Obama administration plan that grants a limited exception to contracts that qualify for hedging under accounting standard.

Here is Senator Dodd's summary and also attached to this post. I must point out someone has a sense of humor for financial institutions must prepare funeral plans for their demise.

On requiring banks to have increase capital injections:

Institutions can provide their own life support.

and

Funeral Plans: Requires large, complex companies to periodically submit plans for their rapid and orderly shutdown should the company go under.

Shall we all wear black when watching the bill mark-up?

Meanwhile the FDIC screwed up and gave thumbs up to 3 banks who later failed. The problem is not enough staff and a new review called the Merit Program, which isn't complete.

“Substituting Merit exams for full-scope examinations made it less likely that FDIC employees would be in a position to see if a previously strong bank was beginning to slide in the wrong direction,” Kelley said in an e-mail.

Shrinking Staff

When the Merit program began in 2002, the FDIC staff had shrunk to 5,430 people from 6,452 in 2000 and 22,586 in 1991, near the end of the savings and loan crisis. After bottoming at 4,500 in 2007, the number has been increased to more than 6,000.

Dodd's bill mentions staffing and critical expertise needed to regulation the financial industry.

Goldman Sachs is already preparing to stop any possibility of their break up. Currently the claim is to say they aren't so big after all.

Here is the link to the Banking, Housing and Urban Affairs Committee's press release.

On my first pass review, this bill actually looks like some real reform, unlike the watered down, loophole ridden bills we are seeing come out of the Financial Services Committee in the house.

Please add your insights to this massive reform bill. There is no doubt any meaningful reforms will be attacked by lobbyists to make the hill look like it's covered in fire ants.

Meta: 

Comments

Where is everybody?

I personally want to ban from Congress the word comprehensive. We get these massive bills, over 1000 pages and believe me, if one has a legal and legislative background, that means lots of places to hide loopholes, exemptions, poison pills, tricks and games.

I hope all of you take the time to just review at least a few sections of the draft.

I'm getting lonely on here! It's like I'm the only one writing posts all of a sudden!

You must have Javascript enabled to use this form.

I'd also like to ban "Omnibus Reconciliation"

Representatives and Senators sneak all kinds of mischief into these. Reconciliation should be about a specific budget or authorization, not a vehicle to do favors for cronies or line up careers after Congress. Does anybody remember the famous multi-billion dollar earmark for the oil industry, with 10 percent dedicated to "administrative costs" for a facility in Sugarland, Texas? Deals cut at midnight such as Rostenkowski's 1986 "tax reform" or the Catastrihic Health Care Plan that almost got him lynched by a mob of senior citizens when they learned what it was going to cost them. We have "Government in the Sunshine" laws for the executive branch, but Omnibus bills are middle-of-the-night affairs, in which the people get screwed.
Frank T.

You must have Javascript enabled to use this form.

Frank T.

how about a ban on legislative text length

Max it can be is 100 pages. If it's longer than that, they have to introduce it as a separate bill.

Yeah, it's also fairly silly. Even legislative staffers cannot determine every nook and cranny, even attorneys cannot...in time.

and we know Congress doesn't even read all of these bills...

I trust Chris Dodd like a diamond rattle-back, but I was pleasantly surprised so far with this bill.

Same is true with Frank. He can talk a good game, have some great sounding Populist rhetoric, but just about when it's time to pass something....it's gutted.

I know EPers are starting to get a good grasp on the financial crisis from all of the posts on it. So, I'm hoping all will scan at least some of the actual bill...

for that is another issue, often bill language is not the same as even summaries and assuredly isn't the same as press releases and rhetoric as we've seen, in mass from the Comprehensive health care bill.

There's that word again! Comprehensive to me implies "lots of hidden lobbyists agendas buried in mountains of paper so we hope you won't notice until it's too late".

You must have Javascript enabled to use this form.

Don't have to read it, just look for it's friends

Fortunately I have a way to know if this bill is just feel good phooey or real reform, and it doesn't require me reading a word of it.

Why should I read it, I'm not getting paid a penny to do so. But the financial industry has people getting paid plenty of pennies to scrutinize every word.

If Goldman likes it, then it's trash. If the banksters back it, it's trash. If Ron Paul is against it, it's trash.

Only a bill fought tooth and nail against by the banksters will be any good. Until they scream bloody murder, it's trash.

You must have Javascript enabled to use this form.

With friends like these, the bill needs no enemies?

I 'm not willing to assume that Ron Paul and I intersect on this bill, so I'll await the analyses of a few people I trust since I am not personally plowing through 1100 pages. Thanks for the summary, Robert.

 

 

 

Not pretending to be an economist

You must have Javascript enabled to use this form.

Not pretending to be an economist

George Washington's blog

Has some good comments on what's missing.

I haven't scanned it enough to be sure, although I think all need to read the legislative text plus bear in mind this will be marked up, so I hope Mr. Washington (most interesting nom de plume!) is reading from the actual legislative text.

One point is I agree, because Senator Sanders Too Big to Exist bill is gaining traction, this is a big attempt to kind of water down that movement to simply break up these mammoths, like GS, Citigroup, JPMorgan Chase right now, (w/n 90 days).

Considering Wells Fargo is going into the payday loan business, I think they should be broken up.

You must have Javascript enabled to use this form.

Wells Fargo?

Does the Comptroller of the Currency or FDIC Director have an opinion on the suitability of these credit lines for an institution that takes deposits? Does it affext the rating of Wells Fargo's debt? Will banks be allowed to use kneecap-breaking as debt collection in years to come? How about bookmaking? In case no one in the Obama Administration or at the Fed remembers, these are BANKS. Some of them used to be called THRIFT Institutions.
Frank T.

You must have Javascript enabled to use this form.

Frank T.

I posted the payday loan activity by Wells Fargo and others

a while ago. I haven't heard a word of it from the media or esp. any politician since that time.

Right now, it seems the financial institutions are busy raping the people as much as they can with credit cards, which is what's making the news.

But yeah, they are moving into payday loans.

People do not get a payday loan has the link.

You must have Javascript enabled to use this form.

credit rating agencies

p. 687

Can revoke their privileges, claims "censure and fine" (yeah, right, fines are usually just a tooth booth fee), but also then it says "separations of sales from ratings..
but turns around and says the commission can give an exemption for this. (p. 691)

It also establishes an Office of Credit Ratings Agencies (p. 695)

Also have the bill title: Restoring American Financial Stability Act of 2009.

You must have Javascript enabled to use this form.

Greider: House Bill regarding derivatives

drafted by "financial industry experts." Not surprising but very disgusting - courtesy of Blue Dogs and New Democrats:

A well-informed Congressional source confirmed that the original language in the draft legislation was written by financial-industry experts. It "was probably written by JPMorgan and Goldman Sachs," he told me, "and possibly the Chicago Mercantile Exchange." The Chicago exchange trades commodity futures--hog bellies, beef, grains--and more exotic derivatives. It is a rival to Wall Street but very close to agribusiness interests like Cargill, the giant grain trader, that make heavy use of derivatives.

Washington insiders may not be shocked to learn that private-interest groups provided the draft bill. This is what lobbyists often do for the legislative process, especially on complex subjects like taxation and regulatory law. But the legislation was delivered to the House Financial Services Committee by Blue Dog Democrats, not lobbyists. There are fifteen Blue Dogs and like-minded members on the committee. Together they make up more than one-third of the committee's Democratic majority (forty-two Democrats, twenty-nine Republicans).

RebelCapitalist.com - Financial Information for the Rest of Us.

You must have Javascript enabled to use this form.

I'm wondering about fraud

If they had not rescued the financial banks with TARP....then there wouldn't have been any money to buy Congress. So, can one claim taxpayer money is being funneled via special favors to certain politicians and call it campaign finance law violations?

This is why I haven't written much on the House Bill. It's here but it's so full of lobbyists tricks I didn't write it up yet.

It's also so bad, that's another reason I haven't gone into the details. When I see a bill so full of crap all I can think of is to defeat it, vs. analyze it, that's unless no one else sees the lobbyist web of legislative trickery and shenanigans.

I pay no attention to labels such as "Blue dog", I want the names of how is getting the money from where.

Corruption in Congress seems to have no boundaries and the ones who are not corrupt I think I can count on 1 hand, maybe 2. I know who those are, the rest of the lot, well, I haven't bothered to categorize them as "blue" or "red" or whatever...

more like "GS boy", and "Bill Gate's bitch" and "U.S. Chamber of Commerce brat" or "NASSCOM representative" and so on.

You must have Javascript enabled to use this form.