A new, wide-ranging financial regulatory overhaul bill introduced by Democratic Sen. Chris Dodd would effectively strip the Federal Reserve of almost all of its bank oversight and consumer protection powers.
The bill is a strong rebuke of Federal Reserve Chairman Ben Bernanke, who has long advocated an increase in Fed power, and that oversight fall almost entirely to the monetary authority.
"We must restore responsibility and accountability in our financial system to give Americans confidence that there is a system in place that works for and protects them," Dodd said in a statement.
"We must create a sound foundation to grow the economy and create jobs."
If the bill passes, the Fed would remain responsible only for monetary policy — and unable to make the kinds of emergency loans that propped up failing banks last year, reports The Wall Street Journal.
Dodd’s 1,136-page discussion draft also calls for creating an Agency for Financial Stability empowered to identify and remove systemic risks to the economy.
This agency would have wide authority to collect and use information, and could require both domestic and foreign-owned financial firms it deemed systemic risks to submit to greater supervision.
The bill gives the Treasury Department the power to wind down a faltering, systemically risky firm for which the Federal Deposit Insurance Corporation would act as receiver.
The FDIC could also assess the financial industry to cover the cost of the resolution after the fact.
In addition, the measure calls for consolidating bank supervision into a single Financial Institutions Regulatory Administration funded by the Federal Reserve and by assessments on the institutions it oversees.
This agency would have to adhere to some limits on what it charges federally chartered banks and credit unions with less than $10 billion in assets.
State-chartered banks under that asset threshold would escape assessment altogether.
It also calls for creating a new Consumer Financial Protection Agency empowered to write and enforce rules governing all financial products and services that could exempt specific institutions or a class of institutions from its rules.
Congressman Barney Frank is working on similar legislation for the House, MarketWatch reports.
Frank expects that the House panel's version of legislation will come to a vote later this year, while Dodd doesn't expect to finish consideration of his version until next year.
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