WASHINGTON–Passing a regulatory reform bill through the House was a bruising, months-long fight that appeared ready to spin out of control. That battle may pale in comparison to the legislation's progress through the Senate.
American Banker, an affiliate of Credit Union Journal, reported that after a rebuke by his fellow Democratic colleagues for attempting to push through reform legislation along party lines, Banking Committee Chairman Chris Dodd is now attempting to craft a bipartisan bill. He has little time to waste. With midterm elections expected to distract lawmakers later in the year, observers agree Dodd will have to move quickly to cut deals in order to build momentum back for his legislation, American Banker reported.
Some of those compromises already appear to be in the offing. Sources told American Banker that, among other things, Dodd is considering changing his bill to allow the Federal Deposit Insurance Corp. to maintain its bank supervisory responsibilities — a move that would ease some community bank concerns with the legislation.
While observers are mixed on the Senate's chances, many members are optimistic that reform will happen in 2010. "There is a real sense that this is a moment in time where with these abuses, to not act would be a huge mistake," Sen. Mark Warner, a moderate Democrat on the Banking Committee, said in a December interview with American Banker. "With the kind of mistakes that were made, to somehow say the status quo is acceptable just doesn't cut it."
The House bill largely followed a reform blueprint offered by the Obama administration in June, but the Senate bill is likely to look substantially different.
Dodd initially sought to create a single prudential bank regulator, merging the Office of the Comptroller of the Currency with the Office of Thrift Supervision and stripping both the Federal Reserve Board and the FDIC of their bank oversight. (In contrast, the House bill would combine only the OCC and OTS.)
But sources told American Banker Dodd may now opt to split bank oversight, with federally chartered entities overseen by the OCC (which would still be merged with the OTS) and state-chartered banks regulated at the federal level by the FDIC.
Such a move would please community bankers and FDIC officials, who have warned that a single banking regulator would be partial to the largest banks and effectively destroy the dual banking system.
Sources caution, however, that the bill remains in flux and subject to intense ongoing negotiations between members of the Senate Banking Committee. In particular, Dodd is said to be working closely with Sen. Richard Shelby, the lead GOP member of the panel, on certain aspects of the bill.
