Yesterday, Sen. Chris Dodd released his financial regulatory reform plan [PDF], and it's pretty darn good. Don't get confused: On the whole, the mechanisms and ideas are very similar to those in the House bill, but the structures are a different -- it's more about who than what or how, with different offices being created to do much the same tasks and enforce the same rules that are in other proposals. There are a few new ideas -- most notably, barring commercial banks from nominating directors to Regional Federal Reserve Banks, as they do now, and allowing the SEC to assess fees -- that are extremely important and missing from other proposals.
You may hear that Treasury officials disagree with Dodd about his bill, but don't get misled: There is a lot of substantive agreement, but the Obama folks (and Barney Frank) are skeptical that Dodd can get his vision through the Senate, especially with his Republican ranking member, Richard Shelby, already moaning about the plan. Dodd is a savvy legislator, though, and perhaps knows to start with the big ask -- unlike the administration -- and also has the pressure to prove himself a real reformer coming from his constituents back in Connecticut, who continue to suspect him of being far too close to the financial industry.
I do share some of Felix Salmon's concerns about taking the Fed out of the systemic risk picture, especially if the Dodd bill, as I had hoped, makes the the institution more publicly accountable. But the heavy lifting will be combining all the current bank supervisory agencies: If Dodd can overcome the objections of regulators, banks and Republicans, and pass his ideas in the senate, I think, somewhat counter intuitively, it won't be too hard to combine that version with the House bill because the underlying philosophies are so close.
-- Tim Fernholz