With this bill, there are now competing versions of regulatory reform in the Senate and the House, where the effort is being led by Financial Services Committee Chairman Barney Frank (D-MA). Unlike Frank, who chose a piece-meal approach, Dodd is moving his legislation as one large package.
Overall, Dodd’s bill is more ambitious, and would go further in terms of blowing up and replacing the current system (but it also hasn’t been through mark-up, which is where some of the changes in the various pieces of House legislation originated). Below is a comparison of the major provisions in the two versions:
|Provision||Senate Bill||House Bills|
|Consumer Financial Protection Agency (CFPA)||Includes a CFPA with rule-writing authority, with no federal preemption of state law. All financial institutions are subject to examination by the CFPA.||Includes a CFPA with rule-writing authority, and bank regulators can preempt state law on a case-by-case basis. Financial institutions with less than $10 billion in assets are not subject to CFPA examinations.|
|Consolidated Regulators||Consolidates all existing federal bank regulators into one super-regulator, the Financial Institutions Regulatory Authority (FIRA). Removes bank supervisory powers from the Federal Reserve and the FDIC.||Merges the Office of Thrift Supervision (OTS) and the Office of the Comptroller of the Currency (OCC), leaves other regulators in place.|
|Resolution Authority||Includes resolution authority, funded by an after-the-fact assessment on institutions with more than $10 billion in assets. Institutions must draw up a “living will,” to be used in the event they must be unwound.||Includes resolution authority, pre-funded by an assessment on institutions with more than $10 billion assets. Institutions must draw up a “living will,” to be used in the event they must be unwound.|
|Systemic Risk||Creates a new Agency for Financial Stability, composed of the federal bank regulators and two independent councilors appointed by the President. The council will make decisions regarding systemically risky firms.||A systemic risk council, composed of the federal bank regulators, will make decisions, to be carried out by the Federal Reserve. The Fed would be empowered to conduct “on site” examinations of any systemically risky firm.|
|Breaking up risky firms.||Gives federal regulators the authority to break up systemically risky firms on a case-by-case basis.||Gives federal regulators the authority to break up systemically risky firms on a case-by-case basis.|
Both the House and Senate also have provisions aimed at reining in use of over-the-counter derivatives and regulating hedge funds and other non-bank entities. But politically, the two most contentious issues will likely be reconciling Dodd’s complete consolidation of regulators with Frank’s more limited approach, and trying to garner Republican support for the CFPA on the Senate side.