Posted on November 10, 2009 by Blank Rome Government Relations

The Dodd Plan - A Large Stake in the Ground

Senate Banking Committee Chairman Chris Dodd (D-CT) today is releasing its comprehensive draft legislation to reform the financial sector. The Restoring American Financial Security Act of 2009 represents a bold and sweeping approach to financial industry reform. The headline emerging from the 1100+ pages will most likely be the creation of a single federal bank regulator.  Significant powers would be transferred from the Federal Reserve, the FDIC and the Treasury to a new Financial Institutions Regulatory Administration.  The bill would also create a new Agency for Financial Stability to review "too big to fail" issues, a new National Insurance Office, and the Consumer Financial Protection Agency proposed by the Obama Administration.  Executive compensation provisions are in the bill with a focus on shareholder votes on certain types of packages, clawbacks and other restrictions. 
 Chairman Dodd is staking out a big piece of turf in the legislative battle ahead.  Liberated from the need to compromise with committee Republicans and spurred-on by his own re-election worries he is proposing to shake-up financial regulation in the United States in the most aggressive way we have seen to date.  No one is a more sophisticated inside player in the Senate than Sen. Dodd. In taking this approach he is advancing two goals—he has put a lot on the table and left himself room to take things off to get the bill passed and he has also taken a stance that will help him fight those in Connecticut who have been saying he is to cozy with the financial sector.
 
We will have updates in the hours and days ahead about the reaction to this proposal.  Watch this space.
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Posted on November 6, 2009 by Blank Rome Government Relations

Revealing it All?

On home improvement shows, it’s called the big “reveal.”  In Washington, the “reveal” is expected on Monday in the Senate Banking Committee with the much anticipated release of Chairman Chris Dodd’s (D-CT) omnibus financial reform bill. Rumors of its content have been leaking out for several days. Also being revealed --although it has been hinted at for weeks-- is the partisan divide that has opened up on Chairman Dodd's committee.

One of the most controversial elements expected to be in Dodd’s plan is the removal of bank supervisor authorities from the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of Comptroller of the Currency, and the Office of Thrift Supervision in order to consolidate those authorities into one new super bank regulator. Neither the administration proposal nor House Financial Services Committee measures contemplated this approach. In fact, Financial Services Committee Chairman Barney Frank (D-MA) has criticized the concept because it does not “respect and preserve the dual banking system;” it undercuts the role of state bank supervisors; and it fails to preserve the role of the FDIC, an agency that Frank thinks is performing well.

Other expected provisions are a “Council of Regulators” approach to systemic risk; a Consumer Financial Protection Agency that will have oversight over most financial service products except for insurance or securities; credit rating agency reform; resolution authority for large financial institutions; and regulation of derivatives. Dodd plans to hold one or more hearings on his bill the week of November 16th and expects the committee to markup the bill after Thanksgiving.

Dodd has decided to move ahead without the support and assistance of Ranking Member Shelby (R-AL) and the other committee Republicans. Some are viewing this as a setback given that Dodd and Shelby had made a show in the past year of their shared views on some key parts of the financial reform agenda. Over the past six-to-eight weeks, as Dodd has pushed to pull the package together, it became clear the GOP side of the committee was reticent to come along. While this prevents the bipartisan approach Dodd had wanted, it does free him to take the bold approach it now appears we will see. Given the importance to his re-election of appearing to shake-up the financial establishment, Dodd may benefit from the freedom to stake out this turf. Whether that will contribute to the ultimate enactment of legislation remains to be seen.

Watch this space early in the week for a discussion of the outlook on the House side for continuation of the progress in assembling a comprehensive financial reform package.
 

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