The Wonk Room

Dodd Releases Regulatory Reform Bill — How Does It Compare To The House?

Sen. Chris Dodd (D-CT) and Rep. Barney Frank (D-MA)

Today, Senate Banking Committee Chairman Chris Dodd (D-CT) released a discussion draft of his bill overhauling the nation’s financial regulatory framework. At the bill’s formal roll-out, Dodd called it “sweeping, bold, [and] long-overdue.”

With this bill, there are now competing versions of regulatory reform in the Senate and the House, where the effort is being led by Financial Services Committee Chairman Barney Frank (D-MA). Unlike Frank, who chose a piece-meal approach, Dodd is moving his legislation as one large package.

Overall, Dodd’s bill is more ambitious, and would go further in terms of blowing up and replacing the current system (but it also hasn’t been through mark-up, which is where some of the changes in the various pieces of House legislation originated). Below is a comparison of the major provisions in the two versions:

Provision	Senate Bill	House Bills
Consumer Financial Protection Agency (CFPA)	Includes a CFPA with rule-writing authority, with no federal preemption of state law. All financial institutions are subject to examination by the CFPA.	Includes a CFPA with rule-writing authority, and bank regulators can preempt state law on a case-by-case basis. Financial institutions with less than $10 billion in assets are not subject to CFPA examinations.
Consolidated Regulators	Consolidates all existing federal bank regulators into one super-regulator, the Financial Institutions Regulatory Authority (FIRA). Removes bank supervisory powers from the Federal Reserve and the FDIC.	Merges the Office of Thrift Supervision (OTS) and the Office of the Comptroller of the Currency (OCC), leaves other regulators in place.
Resolution Authority	Includes resolution authority, funded by an after-the-fact assessment on institutions with more than $10 billion in assets. Institutions must draw up a “living will,” to be used in the event they must be unwound.	Includes resolution authority, pre-funded by an assessment on institutions with more than $10 billion assets. Institutions must draw up a “living will,” to be used in the event they must be unwound.
Systemic Risk	Creates a new Agency for Financial Stability, composed of the federal bank regulators and two independent councilors appointed by the President. The council will make decisions regarding systemically risky firms.	A systemic risk council, composed of the federal bank regulators, will make decisions, to be carried out by the Federal Reserve. The Fed would be empowered to conduct “on site” examinations of any systemically risky firm.
Breaking up risky firms.	Gives federal regulators the authority to break up systemically risky firms on a case-by-case basis.	Gives federal regulators the authority to break up systemically risky firms on a case-by-case basis.

Both the House and Senate also have provisions aimed at reining in use of over-the-counter derivatives and regulating hedge funds and other non-bank entities. But politically, the two most contentious issues will likely be reconciling Dodd’s complete consolidation of regulators with Frank’s more limited approach, and trying to garner Republican support for the CFPA on the Senate side.

3 Responses to “Dodd Releases Regulatory Reform Bill — How Does It Compare To The House?”

1. stateofthedivision Says:

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   Dodd also proposed $50,000 incentives for SEC employees to rat on each other. America has abysmal leadership.

   http://stateofthedivision.blogspot.com/2009/11/dodds-50000-bribe-for-sec-employees.html

   Will the House and Senate flip flop on financial regulatory reform, with the Senate offering the more “progressive” bill? For health care reform the House offered more populist language.

   November 10th, 2009 at 1:54 pm

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2. Tom O'Keefe Says:

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   The $50,000 reward is a great idea but it doesn’t go far enough. The SEC needs to attract and keep the BEST people not young kids just out of law school that want to network and make friends with the likes of Bernie Madoff. To do this Congress should allow staff attorneys and investigators to get a percentage of what they recover or save the taxpayers/investors in each case much like a law firm would receive a 20-30 percent contingency fee on the award. I don’t care if the SEC lawyers become millionaires as long as they prevent another Enron or Lehman or Madoff from happening again.

   November 10th, 2009 at 6:26 pm

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3. Ohioan Says:

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   “But politically, the two most contentious issues will likely be reconciling Dodd’s complete consolidation of regulators with Frank’s more limited approach, and trying to garner Republican support for the CFPA on the Senate side.”

   Dodd’s plan to strip the Fed of its powers, regardless of its political difficulty, should be examined first on its merits.

   As Felix Salmon points out, the bill says the Fed will be playing a “key role in assessing financial stability”, so why pull systemic risk regulation authority away from the Fed? I tend to lean towards Frank’s approach on that.

   November 11th, 2009 at 11:01 am

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