WASHINGTON-Senate Banking Committee Chairman Christopher Dodd introduced a draft of a new regulatory reform bill that would combine the four banking regulators - but not NCUA, maintaining the credit union agency's independence, for now.
The focus of Dodd's bill is the consolidation of the alphabet soup of various banking agencies, the FDIC, Federal Reserve, Office of Thrift Supervision and Office of Comptroller of the Currency and creation of a new agency to handle financial institutions that pose a risk to the financial system, as well as creation of a Consumer Financial Protection Agency.
Dodd's proposal, part of a 1,100-page draft, would strip the Federal Reserve of its power to regulate banks, leaving it basically as a manipulator of interest rates, and create three new agencies; one to regulate banks, one to regulate consumer financial products and one to regulate systemic risk.
The systemic risk regulator would be empowered to unwind huge entities that pose a potential risk to the financial system. It is not clear if that includes U.S. Central FCU, whose failure is trickling down and affecting thousands of credit unions across the country. The new agency would be funded by assessments charged institutions, including credit unions, over $10 billion in assets.
The credit union lobby was satisfied last week that NCUA is left untouched in the proposed bill but expressed concern at the consumer agency, which they are fighting in the House.
"We appreciate the NCUA being left independent, but since credit unions didn't cause this crisis, we continue to be opposed to being under the (consumer protection agency)," said NAFCU President Fred Becker. "Also, we're such a small portion of the financial services market place, we do not believe we should be under the 'systemic risk' provision of the bill." In a prepared statement, CUNA President Dan Mica said because CUs are members owned and "have long advocated strong consumer protection," they already operate in a consumer-friendly way.
The prospects of Dodd's proposal are in doubt because during last week's press conference where it was introduced he was joined by the banking panel's eight Democrats - but not a single Republican.
Eventually the Senate bill will be combined with legislation moving through the House on a new consumer protection agency, as well as regulation of derivatives, regulation of credit rating agencies and hedge funds, mortgage securitization and other measures.
The breadth of the Dodd bill and its opposition by Republican senators makes it certain that Congress will not enact the financial regulatory legislation by year-end, as hoped by President Obama, and makes it likely the proposals will be debated well into 2010.
