Senator Dodd has released the Senate version of a financial regulatory reform bill. The House passed its version, The Financial Stability Improvement Act, in December. The Senate's bill, Restoring American Financial Stability Act of 2010, creates an "independent watchdog" (the Consumer Financial Protection Bureau) within the Federal Reserve in charge of looking out for the interests of investors and consumers of financial products, rather than creating a wholly new and separate agency. The bill also contains a host of new measures designed to reduce systematic risk and protect investors against risky and abusive practices.
According to the summary of the bill released earlier this week, the bill highlights include:
Consumer Protections with Authority and Independence: Creates a new independent watchdog, housed at the Federal Reserve, with the authority to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, and protect them from hidden fees, abusive terms, and deceptive practices.
Ends Too Big to Fail: Ends the possibility that taxpayers will be asked to write a check to bail out financial firms that threaten the economy by: creating a safe way to liquidate failed financial firms; imposing tough new capital and leverage requirements that make it undesirable to get too big; updating the Fed’s authority to allow system-wide support but no longer prop up individual firms; and establishing rigorous standards and supervision to protect the economy and American consumers, investors and businesses.
Advanced Warning System: Creates a council to identify and address systemic risks posed by large, complex companies, products, and activities before they threaten the stability of the economy.
Transparency & Accountability for Exotic Instruments: Eliminates loopholes that allow risky and abusive practices to go on unnoticed and unregulated - including loopholes for over-the-counter derivatives, asset- backed securities, hedge funds, mortgage brokers and payday lenders.
Federal Bank Supervision: Streamlines bank supervision to create clarity and accountability. Protects the dual banking system that supports community banks.
Executive Compensation and Corporate Governance: Provides shareholders with a say on pay and corporate affairs with a non-binding vote on executive compensation.
Protects Investors: Provides tough new rules for transparency and accountability for credit rating agencies to protect investors and businesses.
Enforces Regulations on the Books: Strengthens oversight and empowers regulators to aggressively pursue financial fraud, conflicts of interest and manipulation of the system that benefit special interests at the expense of American families and businesses.
The full text of the summary of the bill is available at: http://lawprofessors.typepad.com/files/financialreformsummary231510final.pdf
The full text of the bill is available at: http://banking.senate.gov/public/_files/ChairmansMark31510AYO10306_xmlFinancialReformLegislationBill.pdf