Dodd, Shelby Say They Agree On Some Regulatory Reform Goals

By R. Christian Bruce 

Senate Banking Chairman Chris Dodd (D-Conn.) and ranking Republican Richard Shelby (R-Ala.) released a joint statement Dec. 23 signaling agreement on several goals for financial regulatory reform and voicing hopes for more progress by the time senators return Jan. 20. Among other points, the two said they agree on the need to keep firms from becoming “too big too fail,” stronger consumer protection, a Federal Reserve “more focused on its core responsibility—conducting monetary policy,” and more oversight of derivatives. Even so, Sen. Bob Corker (R-Tenn.), who has been working with fellow Banking Committee member Mark Warner (D-Va.) on regulatory reform issues, expressed optimism during a Dec. 24 interview on CNBC. Meanwhile, a Washington consulting firm Dec. 28 said the Dodd-Shelby statement, though general in tone, telegraphs likely accord on some questions. For example, Federal Financial Analytics Inc. said in a memo to clients that the call to keep financial firms at a manageable size may signal agreement on language in the Dodd discussion draft that would allow regulators to break up large companies. Even more interesting, according to the memo, is the absence of any commitment to reforming regulation of government-sponsored enterprises Fannie Mae and Freddie Mac. Although Shelby and other Republicans have called action on GSEs an essential element of regulatory reform, “the issue has apparently been left for later,” the memo said.