Dodd: Rein in Wall Street

Senate Banking Committee chairman Christopher Dodd on Monday put forth a dramatic – and at 1,336 pages, lengthy – bill to overhaul financial regulations.

March 16, 2010
By Allison Landa, News Editor

Courtesy Flickr Creative Commons user epicharmus

Senate Banking Committee chairman Christopher Dodd on Monday put forth a dramatic – and at 1,336 pages, lengthy – bill to overhaul financial regulations.

“Two years ago today, Bear Stearns was collapsing. In the time since, Americans have faced the worst financial crisis since the Great Depression,” the bill’s official summary reads. “Millions have lost their jobs, businesses have failed, housing prices have dropped, and savings were wiped out. The failures that led to this crisis require bold action.”

Highlights of the bill, which would create the most sweeping change since the Great Depression, include:

1) Consumer protections with authority and independence, which entails the creation of a new independent watchdog housed at the Federal Reserve and with the authority to ensure consumers get clear, accurate information;

2) The end of “too big to fail”, which imposes stringent new capital and leverage requirements that make it undesirable for firms to get too large and updates the Fed’s authority to allow systemwide support but no longer prop up individual firms;

3) An advanced warning system, which creates a council to identify and address systemic risks posed by large companies, products, and activities;

4) Transparency and accountability for exotic instruments, which eliminates loopholes that allow risky and abusive practices to continue unnoticed and unregulated;

5) Federal bank supervision, which streamlines bank supervision to create clarity and accountability;

6) Executive compensation and corporate governance, which allows shareholders to give input on pay and corporate affairs with a non-binding vote.

The bill also seeks to protect investors by providing tougher new rules for transparency and accountability for credit-rating agencies and enforcing regulations on the books.

The newly created Consumer Financial Protection Bureau will be independently led and have an autonomous budget. Additionally, the new nine-member Financial Stability Oversight Council will target risks posed by larger firms along with making recommendations to regulators for stricter regulations on bigger, more complex companies.

“The economic crisis introduced a new term to our national vocabulary – systemic risk,” the summary reads. “In an interconnected global economy, it’s easy for some people’s problems to become everyone’s problems. The failures that brought down giant financial institutions last year also devastated the economic security of millions of Americans who did nothing wrong – their jobs, homes, retirement security, gone overnight.”