As promised, Sen. Chris Dodd introduced financial reform legislation today with the aim of putting it through his Senate Banking committee on starting next Monday. His solo appearance in the Senate press gallery was eerily reminiscent of Max Baucus' one-man introduction of the Senate Finance Comittee's health-care reform bill, but Dodd is clearly more willing to move the process forward when he senses negotiations are fruitless. "We have a sense of urgency," Dodd said. "We do need to act."You can read a summary of the bill here [PDF], and see the legislative language here [PDF]. While the bill does not differ too much from what was leaked beforehand, here are a few notes:
- Still Looking for R's... . The bill still reflects the bipartisan negotiations with Sen. Bob Corker that Dodd abandoned last week, including a compromise that puts a consumer financial protection bureau inside the Federal Reserve, even though no Republicans support the bill. Dodd still hopes for support from across the aisle, if only because senators like Mark Warner and Evan Bayh are leery of voting for the bill without GOP cover. He said as much when pressed on why consumer protection would be housed at the Fed, even as he promised that the Fed would supposedly have no authority over consumer protection, telling reporters "the problem was in terms of votes."
Dodd also mentioned his willingness to include a derivatives compromise being negotiated by Sens. Jack Reed and Judd Gregg even though his original ideas, still visible in this draft, were stronger than what the House passed. There's also the possibility that he could pick up Republicans outside of committee when the bill moves to the floor.
- ...but the devil is still in the details. At first glance, the proposal to put consumer financial protection in the Federal Reserve seems terrible. But looking at the actual legislative language, there is some hope of independence. It seems that the presidentially appointed director of the bureau would have final say over its budget, and the standard needed for other regulators to overrule consumer regulation is extremely high -- basically, systemic risk to the banking system. It also seems at first glance to allow states much more authority in enforcing their own consumer-protection laws and those of the federal government, which is a major improvement over the House bill.
- Here comes Obama. The president issued a statement on the legislation after Dodd's announcement. Though he tacitly accepts housing consumer financial protection in the Fed, the statement also marks some of the administration's first public line-drawing on the issue.
I will not accept attempts to undermine the independence of the consumer protection agency, or to exclude from its purview banks, credit-card companies, or nonbank firms such as debt collectors, credit bureaus, payday lenders or auto dealers. ... I will oppose any loopholes that could harm consumers or investors, or that allow institutions to avoid oversight that is important to financial stability.
Excluding payday lenders, for instance, may very well mean that Obama has given up on getting Corker to vote for the bill.
There's a lot more to go through in this bill (1,336 pages!). I'll have more updates later today, including a response from the reform community. With only about 60 legislative working days left in this Congress to pass this bill, it's a race to the wire now.
-- Tim Fernholz
