Dodd to go alone with draft for financial reform

Sen. Christopher Dodd's plan breaks with the White House.
Sen. Christopher Dodd's plan breaks with the White House. (Harry Hamburg/associated Press)
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By David Cho and Brady Dennis
Washington Post Staff Writer
Wednesday, November 4, 2009

Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) plans to circulate a draft bill of sweeping financial reforms as soon as next week that breaks with the Obama administration and the House on two key issues, officials said.

The legislation, which is still being finalized, would consolidate federal responsibility for banking oversight, now assigned to four agencies, into a single regulator. And, compared with the plan rolled out by the White House, Dodd's measure would grant less power to the Federal Reserve to curb activities that pose a risk to the entire financial system, the officials said.

Under pressure from the administration to move quickly, Dodd now plans to move forward without bipartisan support, sources familiar with the matter said.

Dodd has said that he and Sen. Richard C. Shelby (R-Ala.), the committee's ranking Republican, have held regular meetings to talk about the pending legislation. But staff members on both sides of the aisle say the two men have yet to see eye to eye on a number of issues, including a proposal to create a new consumer agency and heightened government authority for dealing with large, troubled financial firms.

"I don't think they ever got close to agreeing on it," said one Democratic staff member.

Whether the two sides ultimately will find middle ground remains unclear.

"Sen. Shelby has not agreed to anything," his spokesman, Jonathan Graffeo, said Tuesday. "But we've yet to see the draft bill."

Dodd hopes his committee will begin the formal process of approving his bill as soon as the week after next, spokeswoman Kirstin Brost said.

Dodd's measure would reshape Washington's oversight of Wall Street on a more dramatic scale than a parallel effort in the House. The House bill would eliminate only the Office of Thrift Supervision, which regulates thrifts, while Dodd is looking to consolidate all four bank regulators into one.

An administration official, who has reviewed summaries of the bill, called Dodd's bill a good start and has expressed openness to a consolidated regulator.

Meanwhile, the House Financial Services committee has moved forward its own version of the bill. That committee has passed legislation to regulate the largely unmonitored world of financial derivatives and to create a new federal agency that would monitor mortgages, credit cards and other loans to consumers. The House committee is set on Wednesday to debate the details of legislation giving the government broad power to keep watch for systemic risks to the economy and to wind down large, troubled financial companies.

Rep. Barney Frank (D-Mass.), who leads the House committee, said he plans to move his version of the regulatory reform proposal through the entire House before year's end. "I don't have any question that it will be finished by the first week of December," Frank said Tuesday.

The news conference by Frank and leaks about Dodd's plan were not coincidental, sources familiar with the matter said. The administration and Democratic lawmakers, who are all trying to keep the reform effort from losing steam, coordinated their publicity to illustrate that progress was being made.

Frank told reporters he was open to changes in legislation that would allow the government to seize and dismantle large financial firms. For instance, he said he could agree to new language calling for these firms to be assessed upfront fees to cover the cost of a large firm's collapse. Earlier language called for charging the firms after a failure. Federal Deposit Insurance Corp. chairman Sheila Bair has questioned the wisdom of that latter approach, but the administration prefers assessing the fee afterwards.

Frank added that he wants to see the Consumer Financial Protection Agency led by Harvard Law professor Elizabeth Warren, who was a key architect of the new agency. "I want Elizabeth Warren to be the first head of this agency," Frank said.

But some Republicans oppose the agency, saying it would unnecessarily reduce the availability of loans and other financial products.

Staff writer Binyamin Appelbaum contributed to this report.

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