WASHINGTON — Senate Banking Committee Chairman Chris Dodd introduced a moderate regulatory reform bill on Monday, packed with nods to Republicans in an effort to gain some bipartisan support.
The Connecticut Democrat's compromise strategy appears to be designed to make it tough for Republicans to vote against the bill. But by giving so much ground, Dodd may undermine the support of fellow Democrats.
Dodd acknowledged this dilemma at a press conference Monday.
"The legislation I present today contains bipartisan ideas and is the result of a bipartisan effort," he said. "It does not as of yet enjoy bipartisan support."
Facing time pressure, Dodd said he had to release a bill that was capable of generating as much support as possible.
"Every day we delay is a day we are unprepared for what lies around the corner," he said.
The revised legislation was radically different, and far less sweeping, than the vision of reform offered by Dodd last November.
Instead of proposing the creation of an independent consumer protection agency, it would now form a consumer division within the Federal Reserve Board that could have its proposals overridden by a proposed systemic-risk council.
While the original Dodd bill would have stripped the Fed of its bank supervisory responsibilities and created a single prudential regulator for all banks, the new version does not go that far. Though the Fed would lose oversight of holding companies and state banks with less than $50 billion of assets, it would gain oversight of all systemically important firms and keep supervisory responsibilities for all large financial holding companies.
Instead of creating a powerful Financial Institutions Regulation Administration as in the November draft, the new Dodd bill would just eliminate the Office of Thrift Supervision and merge its responsibilities into the Office of the Comptroller of the Currency.
Some observers panned the changes Dodd made, saying it was no better than the status quo.
"They have moved some things around, but it's a shell game," said William Isaac, a former Federal Deposit Insurance Corp. chairman who is now the chairman of LECG. "It's really not fixing the regulatory system. … You are not solving any meaningful problems the way this bill is being watered down. It's a bill that the trade groups and the large institutions have worked hard to neuter and they have succeeded."
It remained unclear if Dodd could keep the necessary Democratic votes to pass the bill along partisan lines, or what changes they may attempt to make.
Although several Democratic panel members have objected to housing a consumer division within the Fed, Dodd was optimistic about their support.
"My hope is they'll be supportive of this," he said. "That is not to say that every one of them will be agreeable to every aspect. This is a large complex piece of legislation as it's proposed, but I've tried to listen to my colleagues."
Analysts said that when push comes to shove, Dodd will hold the Democrats in line, partly out of a desire for them to move the process forward. They said Dodd could then try and strike a deal with Republicans on the Senate floor to guarantee passage of the bill, even if he loses some Democrats in the process.
"Dodd's putting forward a plan that Sen. Richard Shelby can negotiate from," said Jaret Seiberg, an analyst with Washington Research Group, a division of Concept Capital. "This is the type of package where he is going to have to make promises to rewrite sections of the bill before committee action in order to get votes to get it out of committee. … There's more compromising to come before the bill goes to the floor."
