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Sen. Dodd Unveils Financial Regulation Plan

ROBERT SIEGEL, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

MELISSA BLOCK, host:

And I'm Melissa Block.

It's not officially called the never-again bill, but that might be a good name for the financial overhaul unveiled today by Democratic Senator Christopher Dodd.

Senator CHRISTOPHER DODD (Democrat, Connecticut): Never again should the American taxpayer be asked to write a check because of an implicit guarantee that the federal government will bail out a company when it collapses.

BLOCK: The question remains: Can Senator Dodd's second attempt at a rewrite of financial regulations get through the Senate? In a moment, we'll hear from Senator Dodd himself. But first, NPR's John Ydstie takes a look at what's in the bill.

JOHN YDSTIE: After months of negotiating with Republicans to come up with a bipartisan bill, Senator Dodd stood before the microphones and TV cameras alone today. He broke off negotiations with Republicans last week. But Dodd maintained they had a hand in forming much of what is in the new bill.

Sen. DODD: This product that you'll be looking at today reflects an awful lot of work that has gone on between Democrats and Republicans on this committee.

YDSTIE: One area of disagreement between Senator Dodd and Republicans is the power of a new consumer financial protection agency. And Dodd's new proposal is not likely to make Republicans happy. But consumer groups are encouraged, says Ed Mierzwinski of the U.S. Public Interest Research Group, even though the new consumer guardian will be housed at the Federal Reserve.

Mr. ED MIERZWINSKI (Consumer Program Director, Public Interest Research Group): There appear to be strong firewalls to prevent the Federal Reserve from controlling the consumer financial protection agency. So the agency is in the Fed but it's not under the Fed.

YDSTIE: The consumer bureau would also have rulemaking and enforcement power for large, non-bank financial companies, like payday lenders, and for all banks with over $10 billion in assets. That's something large banks don't like, says Scott Talbott, head lobbyist of the Financial Services Roundtable. He says the Fed, which is responsible for the safety and soundness of banks, should be involved in enforcing consumer regulations as well.

Mr. SCOTT TALBOTT (Senior Vice President for Government Affairs, The Financial Services Roundtable): The right result is for two - is for the two halves of the (unintelligible) regulator as well as the consumer protection piece for the bureau and the Fed to work together to achieve those rules that will strengthen the entire sector.

YDSTIE: Douglas Elliott, a former investment banker who's now a fellow at the Brookings Institution, says he thinks the consumer protection bureau will lose some power as the bill moves through Congress.

Mr. DOUGLAS ELLIOTT (Fellow, Brookings Institution): I'm surprised that Senator Dodd has proposed as strong and independent - a strong consumer protection agency as he has. However, that is almost certainly going to be compromised considerably before a bill finally passes the Senate because the Republicans care too much about it.

YDSTIE: As for other elements of the bill, Dodd gives the Federal Reserve more power in this version than in his original proposal last fall, which stripped the Fed of its bank regulation powers. That's too bad, says Elliott.

Mr. ELLIOTT: Senator Dodd had been trying very bravely, I thought, to integrate all of the bank supervisory agencies at the federal level into one safety and soundness regulator. I think that would've been a good idea, but it always seemed politically too difficult and he's obviously had to move away from that.

YDSTIE: What Dodd has done is delineate more clearly which banks will come under the remaining regulators: the Fed, the FDIC and the Office of Comptroller of the Currency. The bill also includes a financial stability oversight council to protect the overall system from collapse. Its approach to regulating exotic financial products like derivatives has not been finalized.

John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

John Ydstie has covered the economy, Wall Street, and the Federal Reserve at NPR for nearly three decades. Over the years, NPR has also employed Ydstie's reporting skills to cover major stories like the aftermath of Sept. 11, Hurricane Katrina, the Jack Abramoff lobbying scandal, and the implementation of the Affordable Care Act. He was a lead reporter in NPR's coverage of the global financial crisis and the Great Recession, as well as the network's coverage of President Trump's economic policies. Ydstie has also been a guest host on the NPR news programs Morning Edition, All Things Considered, and Weekend Edition. Ydstie stepped back from full-time reporting in late 2018, but plans to continue to contribute to NPR through part-time assignments and work on special projects.