Dodd Unveils Financial Reform Bill
BRETT NEELY: Senator Dodd’s message was clear to Karen Petrou at Federal Financial Analytics…
KAREN PETROU: He is determined to do everything he can, including making compromises with which he is uncomfortable, so that if the legislation falters, it cannot be deemed his fault.
But in an interview after unveiling the plan, the senator said the compromises were worth it.
SENATOR DODD: Mature adults, reasonable people, can reach intelligent compromises on these matters, so the American public will have the benefits of this bill.
Dodd’s bill would create a council of regulators to look out for risky behavior. The Federal Reserve would see its powers widened. The strong new consumer protection bureau would be housed there. And the Fed would oversee a wide array of financial firms, including big insurance companies like AIG.
The central bank’s new powers come despite dropping the regulatory ball as the financial bubble formed, says Petrou.
PETROU: The Fed has not covered itself with distinction in the current crisis, but none of the other regulators has either.
One of the most important parts of Dodd’s plan is called “resolution authority.” The idea is to close failing banks without bringing the financial system down. Financial firms would pay a total of $50 billion up front to clean up any future wreckage.
Simon Johnson was chief economist at the IMF. He see a big hole in that proposal.
SIMON JOHNSON: The key issue is the resolution authority is a U.S. resolution authority. The big banks we’re worried about, these are cross-border.
Johnson, who’s written the new book “13 Bankers,” says bank lobbying has gutted much of the overall proposal.
For example, shareholders would get to vote on executive pay, but the vote would be non-binding.
JOHNSON: Rearranging the chairs on the regulatory Titanic is largely the point of this exercise.
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