Senator Dodd has Introduced a Sweeping Financial Reform Bill. Please Help Me Figure Out If Its Good or Bad, and What Its Missing

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A source on the Hill sent me the following summary of Senator Dodd's proposed financial reform bill.

My source notes:

The summary leaves out
Sections 1201-1204, which contain serious changes to the Federal
Reserve bank structures, transparency elements, and restrictions on
13(3).

Comments and observations are always welcome. Dodd said at the
press conference that this is a discussion draft, and that there will
be room for comments and feedback in the next few weeks. The markup
will begin in the first week of December.

This is a fluid process and I encourage you to speak out now on the process, with as much specificity as possible.

The full 1,136-page bill can be viewed at the bottom of this post.

I'm too busy to really read the summary, let alone the full bill.  Please help me figure out what is good, bad or just plain missing, and then let's all phone our senators.

Here is the 11-page summary:

Senate Committee on Banking, Housing, and Urban Affairs, Chairman Chris Dodd (D-CT)

Contact: Kirstin Brost/Justine Sessions, 202-224-7391

Summary: Restoring American Financial Stability – Discussion Draft

Create a Sound Economic Foundation to Grow Jobs, Protect Consumers,

Rein in Wall Street, End Too Big to Fail, Prevent Another Financial Crisis

Over
the past year, Americans have faced the worst financial crisis since
the Great Depression. 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. 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. We must create a sound foundation to grow the economy
and create jobs.

HIGHLIGHTS OF THE DISCUSSION DRAFT

Consumer Financial Protection Agency: Creates
an independent watchdog to ensure American consumers get the clear,
accurate information they need to shop for mortgages, credit cards, and
other financial products, while prohibiting hidden fees, abusive terms,
and deceptive practices.

Ends Too Big to Fail:

Prevents
excessively large or complex financial companies from bringing down the
economy by: creating a safe way to shut them down if they fail;
imposing tough new capital and leverage requirements and requiring they
write their own “funeral plans”; requiring industry to provide their
own capital injections; updating the Fed’s lender of last resort
authority to allow system-wide support but not prop up individual
institutions; and establishing rigorous standards and supervision to
protect the economy and American consumers, investors and businesses.

Protects Against Systemic Risks: Creates
an independent agency with a board of regulators to identify and
address systemic risks posed by large, complex companies, products, and
activities before they threaten the stability of the financial system.
The agency could require companies that threaten the economy to divest
some of their holdings.

Single Federal Bank Regulator: Eliminates
the convoluted system of multiple federal bank regulators to increase
accountability and end unnecessary overlap, conflicting regulation, and
“charter shopping;” keeps in place the healthy dual banking system that
governs 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 and director nominations.

Closes Loopholes in Regulation: 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.

Protects Investors: Provides
tough new rules for transparency and accountability from investment
advisors, financial brokers and 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. 2

INDEPENDENT CONSUMER FINANCIAL PROTECTION AGENCY

The
Consumer Financial Protection Agency will have the sole job of
protecting American consumers from fraud and abuse and will ensure
people get the clear information they need on loans and other financial
products from credit card companies, mortgage brokers, banks and
others.

American consumers already have protections against faulty appliances, contaminated food, and dangerous toys.

With
the creation of the Consumer Financial Protection Agency, they’ll
finally have a watchdog to oversee financial products, giving Americans
confidence that there is a system in place that works for them – not
just big banks on Wall Street.

Why Change Is Needed: The
economic crisis was driven by an across-the-board failure to protect
consumers. When consumer protections are handled by regulators whose
primary responsibility is to safeguard the profitability of the
companies they regulate, consumer protections don’t get the attention
they need. The result has been unfair, deceptive, and abusive practices
being allowed to spread unchallenged, nearly bringing down the entire
financial system.

The
Federal Reserve is the primary consumer protection rule-writer, but it
has repeatedly failed to act despite repeated demands from Congress.
The Federal Trade Commission is responsible for consumer protections
for non-bank finance companies, but lacks the authority and capacity to
examine them.

The Consumer Financial

Protection Agency

• Consumer Protections in One Place: Consolidates
consumer protection responsibilities currently handled by the Office of
the Comptroller of the Currency, Office of Thrift Supervision, Federal
Deposit Insurance Corporation, the Federal Reserve, the National Credit
Union Administration, and the Federal Trade Commission.

• Independent: Led
by a 5 member board with an independent director. The Chairman of the
Financial Institutions Regulatory Administration will have a seat on
the board.

• A Watchdog with Real Teeth: Unites
rule-writing, supervision, and enforcement for consumer protection in a
single, stand-alone agency with broad authority to investigate and
react to abuses as they develop.

• Able to Act Fast: With
this agency on the lookout for bad deals and schemes, consumers won’t
have to wait for Congress to pass a law to be protected from bad
business practices.

• Educates: Creates a new Office of Financial Literacy.

• Regulates Shadow Banking Industry: Levels
the playing field for insured banks by regulating the shadow banking
industry, such as mortgage brokers and payday lenders, for the 1st time and ensures that companies offering customers the same products receive the same regulatory treatment.

• Accountability: Makes
one agency accountable for consumer protections. With many agencies
sharing responsibility, it’s hard to know who is responsible for what,
and easy for emerging problems that haven’t historically fallen under
anyone’s purview, to fall through the cracks.

• Tougher State Laws: Allows
states to pass tougher consumer protections that apply to all lenders,
preventing federal regulations from preempting stronger state laws.

• Works with Bank Regulators: Coordinates with other regulators when examining banks to prevent undue regulatory burden.

• Bases Supervision on Risk: Focuses
resources on companies that pose the biggest risk to consumers -
mortgage bankers, brokers, finance companies and the largest
institutions.

ADDRESSING SYSTEMIC RISKS: THE AGENCY FOR FINANCIAL STABILITY

One financial institution should never be capable of bringing down the entire American economy.

The
newly created Agency for Financial Stability is an independent agency
responsible for identifying, monitoring and addressing systemic risks
posed by large, complex companies as well as products and activities
that can spread risk across firms. It will discourage companies from
getting too large by imposing burdens on them as they grow and give
regulators the authority to break up large, complex companies if they
pose a threat to the financial stability of the United States.

Why Change is Needed: The economic crisis introduced a new term to our national vocabulary – systemic risk.

In
July, Federal Reserve Governor Daniel Tarullo, testified that
“Financial institutions are systemically important if the failure of
the firm to meet its obligations to creditors and customers would have
significant adverse consequences for the financial system and the
broader economy.”

In
short, in an interconnected global economy, it’s easy for some people’s
problems to become everybody’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 because of Wall Street greed
and regulatory failures.

The Agency for Financial Stability

• Strong and Independent: Governed
by an independent chairman, appointed by the President and confirmed by
the Senate, to provide insulation from political manipulation. The
board will have 9 members including the federal financial regulators
and two independent members. The board members' diverse areas of
expertise will strengthen the board’s ability to identify and respond
to emerging risks throughout the financial system.

• Tough to Get Too Big: Writes
increasingly strict rules for capital, leverage, liquidity, risk
management and other requirements as companies grow in size and
complexity, imposing significant costs on companies that pose risks to
the financial system.

• Break Up Large, Complex Companies: Gives the regulators the authority to break up large, complex companies if they pose a threat to the financial stability of the United States.

• Close Gaps in Regulation: Identifies unregulated financial companies that pose systemic risk and assigns them to a federal regulator for supervision.

• Lean and Mean: Expected
to be staffed with a highly sophisticated staff of economists,
accountants, lawyers, former supervisors, and other specialists. With
just rule writing authority and no direct supervision, the agency can
remain small but effective.

• Make Risks Transparent: Collects
and analyzes data to identify and monitor emerging risks to the economy
and make this information public in periodic reports and testimony to
Congress twice a year.

• Oversight of Important Market Utilities: The
Agency for Financial Stability will identify systemically important
clearing, payments, and settlements systems to be regulated by the
Federal Reserve.

4

ENDING TOO BIG TO FAIL

Preventing
another crisis where American taxpayers are forced to bail out
financial firms requires strengthening big companies to better
withstand stress, putting a price on excessive growth that matches the
risks they pose to the financial system, and creating a way to shutdown
big companies that fail without threatening the economy.

Why Change is Needed: As
long as giant firms (and their creditors) believe the government will
prop them up if they get into trouble, they only have incentive to get
larger and take bigger risks, believing they will reap any rewards and
leave taxpayers to foot the bill if things go wrong.

Since
the crisis began, a number of institutions previously considered “too
big to fail” have only grown bigger by acquiring failing companies,
leaving our country with the same vulnerabilities that led to last
year’s bailouts.

Limiting Large, Complex Companies and Preventing Future Bailouts

• Discourage Excessive Growth: Imposes
increasingly strict standards for companies as they grow larger, more
complex, or more interconnected, including heightened capital,
leverage, and liquidity requirements, that ensure these companies have
greater resources to deal with financial shocks.

• Require Companies Provide Their Own Capital Injections: Requires
institutions to issue long-term hybrid debt securities that will
provide them with capital during a systemic crisis so failing
institutions can provide their own life support.

• Funeral Plans:
Requires large, complex companies to periodically submit plans for
their rapid and orderly shutdown should the company go under. Companies
will be hit with higher capital requirements and subject to
restrictions on growth and activity as well as required divestment if
they fail to submit acceptable plans. Plans will help regulators
understand the structure of the companies they oversee and serve as a
roadmap for shutting them down if the company fails. Significant costs
for failing to produce a credible plan create incentives for firms to
rationalize structures or operations that cannot be unwound easily.

• Orderly Shutdown: Creates
a mechanism for the FDIC to unwind failing systemically significant
financial companies through receivership, but not open assistance.
Costs of unwinding these companies will ultimately be charged to
financial firms with assets of over $10 billion, not to the taxpayers.

• Limit Federal Reserve Lending: Updates
the Federal Reserve’s 13(3) lender of last resort authority to allow
system-wide support for healthy institutions or systemically important
market utilities during a major destabilizing event, but not to prop up
individual institutions.

5

CREATING A SINGLE FEDERAL BANK REGULATOR:

THE FINANCIAL INSTITUTIONS REGULATORY ADMINISTRATION

The
Financial Institutions Regulatory Administration will eliminate the
alphabet soup of multiple bank regulators that has led to weak,
confusing regulation where it’s easy for problems to fall through the
cracks and difficult to know who is responsible.

Why Change is Needed: Today,
we have a convoluted system of bank regulators created by historical
accident. There are 4 federal banking agencies that oversee national
and state banks and federal and state thrifts. The result has been
charter shopping, where firms look around for the regulator that will
go easiest on them and fee-funded regulators go easy on those they
regulate in order to keep their business, as well as a mess of
overlaps, redundancies, and blurred lines of responsibility.

Experts
agree that no one would have designed a system that looked like this.
For over 60 years, administrations of both parties, members of Congress
across the political spectrum, commissions and scholars have proposed
streamlining this irrational system. The Financial Institutions
Regulatory Administration will finally achieve that goal.

The Financial Institutions Regulatory Administration

• Independent: Headed
by an independent chairman appointed by the President and confirmed by
the Senate, a Vice Chairman experienced in state banking regulation,
and a board including the chairmen of the FDIC and the Federal Reserve
and two other independent members. It will be funded primarily by
assessments on the industry.

• Single Focused Agency: Combines
the functions of the Office of the Comptroller of the Currency and the
Office of Thrift Savings, the state bank supervisory functions of the
Federal Deposit Insurance Corporation and the Federal Reserve, and the
bank holding company supervision authority from the Federal Reserve.

• Dual Banking System: Preserves the dual banking system, leaving in place the state banking system that governs most of our nation’s community banks.

• Separate Community Bank Division: Establishes
a separate division within the new regulator to regulate community
banks given the different supervisory issues they pose.

• Eliminates Charter Shopping: Stops
financial institutions from choosing the easiest regulator, and stops
fee-funded regulators from going easy on those they regulate to keep
their business.

• Increases Accountability: Having a single regulator will mean an identifiable agency is held responsible for shortcomings in the banking system.

• Speeds Action, Increases Efficiency: Ends
slow, cumbersome, coordinated rulemaking that creates extra red tape
and inconsistent enforcement of the same rules by agencies. Overlaps
impose unnecessary costs on regulated institutions and their customers.

• Focuses the FDIC and the Federal Reserve: The
FDIC will focus on its jobs as deposit insurer and resolver of failed
institutions, retaining backup examination authority over troubled
banks and gaining additional authority to accompany the new agency on
examinations of healthy banks and holding companies to ensure it has
sufficient information to perform its insurance functions. The Federal
Reserve will focus on monetary policy without being distracted by
responsibilities for bank oversight and consumer protections. The
Federal Reserve will continue to play a key role in assessing financial
stability and have guaranteed access to financial institutions and any
needed information.

6

ADDRESSING SYSTEMIC RISKS POSED BY DERIVATIVES

Common
sense safeguards will protect taxpayers against the need for future
bailouts and buffer the financial system from excessive risk-taking.
Over-the-counter derivatives will be regulated by the SEC and the CFTC,
more will be cleared through centralized clearing houses and traded on
exchanges, un-cleared swaps will be subject to margin and capital
requirements, and all trades will be reported so that regulators can
monitor risks in this large, complex market.

Why Change is Needed: The
over-the-counter derivatives market has exploded in the last decade –
from $91 trillion in 1998 to $592 trillion in 2008. During last year’s
financial crisis, concerns about the ability of companies to make good
on these contracts and the lack of transparency about what risks
existed caused credit markets to freeze.

Investors
were afraid to trade as Bear Stearns, AIG, and Lehman Brothers failed
because any new transaction could expose them to more risk.

Over-the-counter
derivatives are supposed to be contracts that protect businesses from
risks, but they became a way for companies to make enormous bets with
no regulatory oversight or rules and therefore exacerbated risks.
Because the derivatives market was considered too big and too
interconnected to fail, taxpayers had to foot the bill for Wall
Street’s bad bets.

Those
bad bets linked thousands of traders, creating a web in which one
default threatened to produce a chain of corporate and economic
failures worldwide. These interconnected trades, coupled with the lack
of transparency about who held what, made unwinding the “too big to
fail” institutions more costly to taxpayers.

Bringing Transparency and Accountability to the Derivatives Market

• Closes Regulatory Gaps: Provides
the SEC and CFTC with authority to regulate over-the-counter
derivatives so that irresponsible practices and excessive risk-taking
can no longer escape regulatory oversight. Uses the Administration’s
outline for a joint rulemaking process with the Agency for Financial
Stability stepping in if the two agencies can’t agree.

• Central Clearing and Exchange Trading: Requires
central clearing and exchange trading for derivatives that can be
cleared and provides a role for both regulators and clearing houses to
determine which contracts should be cleared. Requires the SEC and the
CFTC to pre-approve contracts before clearing houses can clear them.

• Safeguards for Un-Cleared Trades: Requires
traders post margin and capital on un-cleared trades in order to offset
the greater risk they pose to the financial system and encourage more
trading to take place in transparent, regulated markets.

• Market Transparency: Requires
data collection and publication through clearing houses or swap
repositories to improve market transparency and provide regulators
important tools for monitoring and responding to risks.

7

HEDGE FUNDS

Hedge
funds worth over $100 million will be required to register with the SEC
as investment advisers and to disclose financial data needed to monitor
systemic risk and protect investors.

Why Change is Needed:

Hedge
funds are responsible for huge transfers of capital and risk, but
generally operate outside the framework of the financial regulatory
system, even as they have become increasingly interwoven with the rest
of the country’s financial markets.

As
a result, no regulator is currently able to collect information on the
size and nature of these firms or calculate the risks they pose to the
broader economy. The SEC is currently unable to examine private funds’
books and records or take sufficient action when it suspects fraud.

Raising Standards and Regulating Hedge Funds

• Fills Regulatory Gaps: Ends
the “shadow” financial system in which hedge funds and other private
pools of capital operate by requiring that they provide regulators with
critical information.

• Register with the SEC: Requires
hedge funds to register with the SEC as investment advisers and provide
information about their trades and portfolios necessary to assess
systemic risk. This data will be shared with the systemic risk
regulator and the SEC will report to Congress annually on how it uses
this data to protect investors and market integrity.

• Independent Custody of Client Assets: Requires investment advisers to use independent custodians for client assets to prevent Madoff-type frauds.

• Greater State Supervision: Raises
the assets threshold for federal regulation of investment advisers from
$25 million to $100 million, a move expected to increase the number of
advisors under state supervision by 28%. States have proven to be
strong regulators in this area and subjecting more entities to state
supervision will allow the SEC to focus its resources on newly
registered hedge funds.

INSURANCE

Office of National Insurance:

Creates
a new office within the Treasury Department to monitor the insurance
industry, coordinate international insurance issues, and requires a
study on ways to modernize insurance regulation and provide Congress
with recommendations.

Streamlines the regulation of surplus lines insurance and reinsurance through state-based reforms. 8

CREDIT RATING AGENCIES

Establishes
a new Office of Credit Rating Agencies at the Securities and Exchange
Commission to strengthen regulation of credit rating agencies. New
rules for internal controls, independence, transparency and penalties
for poor performance will address shortcomings and restore investor
confidence in these ratings.

Why Change is Needed:

Rating
agencies market themselves as providers of independent research and
in-depth credit analysis. But in this crisis, instead of helping people
better understand risk, they failed to warn people about risks hidden
throughout layers of complex structures.

Flawed
methodology, weak oversight by regulators, conflicts of interest, and a
total lack of transparency contributed to a system in which AAA ratings
were awarded to complex, unsafe asset-backed securities - adding to the
housing bubble and magnifying the financial shock caused when the
bubble burst. When investors no longer trusted these ratings during the
credit crunch, they pulled back from lending money to municipalities
and other borrowers.

New Requirements and Oversight of Credit Rating Agencies

• New Office, New Focus at SEC: Creates
an Office of Credit Ratings at the SEC with its own compliance staff
and the authority to fine agencies. The SEC is required to examine
Nationally Recognized Statistical Ratings Organizations at least once a
year and make key findings public.

• Disclosure: Requires
Nationally Recognized Statistical Ratings Organizations to disclose
their methodologies, their use of third parties for due diligence
efforts, and their ratings track record.

• Independent Information: Requires
agencies to consider information in their ratings that comes to their
attention from a source other than the organizations being rated if
they find it credible.

• Conflicts of Interest: Prohibits compliance officers from working on ratings, methodologies, or sales.

• Liability: Investors
could bring private rights of action against ratings agencies for a
knowing or reckless failure to investigate or to obtain analysis from
an independent source.

• Right to Deregister: Gives the SEC the authority to deregister an agency for providing bad ratings over time.

• Education: Requires ratings analysts to pass qualifying exams and have continuing education.

9

EXECUTIVE COMPENSATION AND CORPORATE GOVERNANCE

Strengthening Shareholder Rights

Giving
shareholders a say on pay and proxy access, ensuring the independence
of compensation committees, and requiring public companies to set
clawback policies to take back executive compensation based on
inaccurate financial statements are important steps in reining in
excessive executive pay and can help shift management’s focus from
short-term profits to long-term growth and stability.

Why Change Is Needed: In this country, you are supposed to be rewarded for hard work.

But
Wall Street has developed an out of control system of out of this world
bonuses that rewards short term profits over the long term health and
security of their firms.

Incentives
for short-term gains likewise created incentives for executives to take
big risks with excess leverage, threatening the stability of their
companies and the economy as a whole.

Giving Shareholders a Say on Pay and Creating Greater Accountability

• Vote on Executive Pay and Golden Parachutes: Gives
shareholders a say on pay with the right to a non-binding vote on
executive pay and golden parachutes linked to corporate takeovers. This
gives shareholders a powerful opportunity to hold accountable
executives of the companies they own, and a chance to disapprove where
they see the kind of misguided incentive schemes that threatened
individual companies and in turn the broader economy.

• Nominating Directors: Gives
shareholders proxy access to nominate directors. Providing shareholders
a greater role in choosing directors can help shift management’s focus
from short-term profits to long-term growth and stability.

• Independent Compensation Committees: Standards
for listing on an exchange will require that compensation committees
include only independent directors and have authority to hire
compensation consultants in order to strengthen their independence from
the executives they are rewarding or punishing.

• Clawbacks for Executives at Public Companies: Requires
that public companies set policies to take back executive compensation
if it was based on inaccurate financial statements that don’t comply
with accounting standards.

• SEC Review: Directs
the SEC to clarify disclosures relating to compensation, including
requiring companies to provide charts that compare their executive
compensation with stock performance over a five-year period.

10

SEC AND IMPROVING INVESTOR PROTECTIONS

Every
investor – from a hardworking American contributing to a union pension
to a day trader to a retiree living off of their 401(k) – deserves
better protections for their investments. Investors in securities will
be better protected by improving the competence of the SEC, creating
uniform standards for those providing customers investment advice, and
giving investors the right to sue those who commit securities fraud.

Why Change Is Needed: The
Madoff scandal demonstrated just how desperately the SEC is in need of
reform. The SEC has failed to perform aggressive oversight and is
unable to understand the very companies it is supposed to regulate. And
investors have been used and abused by the very people who are supposed
to be providing them with financial advice.

SEC and Beefed Up Investor Protections

• SEC Reforms: Mandates an annual assessment of the SEC’s internal supervisory controls and a biannual GAO study of SEC management.

• Uniform Standards for Advisors: Mandates uniform standards for anyone providing customers investment advice, eliminating different standards for broker?dealers
and investment advisers. Small investors should have uniform
protections regardless of the title of the financial professional
advising them has.

• Best Interest of the Client: Brokers
who give investment advice will be held to the same fiduciary standard
as investment advisers – they will be required to act in their clients’
best interest.

• Aiding and Abetting: Investors will be able to sue persons who help commit securities fraud.

• New Advocates for Investors: Creates
the Investment Advisory Committee, a committee of investors to advise
the SEC on its regulatory priorities and practices as well as the
Office of Investor Advocate in the SEC, to identify areas where
investors have significant problems dealing with the SEC and FINRA and
provide them assistance.

• Funding: The self-funded SEC will no longer be subject to the annual appropriations process.

SECURITIZATION

Companies
that sell products like mortgage-backed securities are required to
retain a portion of the risk to ensure they won’t sell garbage to
investors, because they have to keep some of it for themselves.

Why Change Is Needed:

Companies
made risky investments, such as selling mortgages to people they knew
could not afford to pay them, and then packaged those investments
together, called asset-backed securities, and sold them to investors
who didn’t understand the risk they were taking. For the company that
made, packaged and sold the loan, it wasn’t important if the loans were
never repaid as long as they were able to sell the loan at a profit
before problems started. This led to the subprime mortgage mess that
helped to bring down the economy.

Reducing Risks Posed by Securities

• Skin in the Game: Requires
companies that sell products like mortgage-backed securities to retain
at least 10% of the credit risk. That way if the investment doesn’t pan
out, the company that made, packaged and sold the investment would lose
out right along with the people they sold it to.

• Better Disclosure: Requires issuers disclose more information about the underlying assets and to analyze the quality of the underlying assets.

11

MUNICIPAL SECURITIES

Municipal
securities will have better oversight through the registration of
municipal advisers and increased investor representation on the
Municipal Securities Rulemaking Board.

Why Change is Needed:

Financial
advisers to municipal securities issuers have been involved in
“pay-to-play” scandals and have recommended unsuitable derivatives for
small municipalities, among other inappropriate actions, and are not
currently regulated.

Better Oversight of Municipal Securities

• Registers Advisors and Brokers: Requires
SEC registration for financial advisers, swap advisers, and investment
brokers – unregulated intermediaries who play key roles in the
municipal bond market.

• Regulates Advisors and Brokers: Subjects
financial advisers, swap advisers, and investment brokers to rules
issued by the Municipal Securities Rulemaking Board and enforced by the
SEC or a designee.

• Puts Investors First on the MSRB Board: Gives
investor and public representatives a majority on the MSRB to better
protect investors in the municipal securities market where there has
been less transparency than in corporate debt markets.

CREATING A 21st CENTURY WORKFORCE FOR 21st CENTURY REGULATORS

This bill will take a look at a key hurdle for creating competent regulatory agencies: competent staff.

Why Change is Needed: The
new proposals will create three new agencies – the Financial
Institutions Regulatory Administration, the Agency for Financial
Stability and the Consumer Financial Protection Agency – each posing
staffing challenges that will determine the regulators’ success or
failure.

A Better Work Environment to Attract Better Staff: The
bill will set up a panel to look at the staffing needs of the three new
agencies based on the successful panel that helped the IRS to improve
their hiring practices. The advisory panel will last only three years
to see that these agencies are able to attract, cultivate, and retain
competent staff qualified to regulate complex, 21st century financial institutions.

Here is the full bill:

Sen. Chris Dodd's Proposed Financial Overhaul Bill -

Comments

[Anonymous]

It is smearing lipstick on a pig. Loads of regulatory bureaucracy so that the big banks can preserve the status quo.

[Anonymous]

This is good for 2 reasons: 1) any subsequent blow up will be bigger than the previous one, and 2) nobody, including ZH, will know about it. Like a super-nova at the edge of the Universe.

[Chignos]

The Democrat world view is that no one should ever have to be held personally responsible because we're all victims.  Therefore, we need the Democrat nanny state--and 1900 page bills to obfuscate who's really responsible--to make sure that no one ever gets the death penalty.  Oh, did I mention that the trade-off is we all have to live under the statist thumb of dumb-dumb Dodd?

[Chignos]

Support Peter Schiff to get rid of dumb-dumb Dodd.

http://www.youtube.com/user/schiffreport?blend=3&ob=4

[Anonymous]

One glaring missing part is that Dodd has not explained why he took that sweetened deal Country Wide, or better yet, why he has not resigned in disgrace.

[Anonymous]

i) The Consumer Protection Agency, basically an Ombudsman, works.

ii) Otherwise, the bill asks for the Fed and SEC to become more efficient at regulating the financial markets!! -there's a lot of well-meaning stuff in there, however, the application is 'preparing to win the last war we fought'. Essentially, although the Fed members will write down recommendations they are, if history is anything to go by, unlikely to levy 'significant costs' on too large banking firms -until it becomes to late. Isn't this precisely what happened after the 1930s'?- legislation capped Bank Holding companies and was later relaxed.

Besides which, the train has left the station. What percentage of US Deposits is now controlled by the few large Banking firms, north of 90% quite possibly. Breaking these firms into divisions might limit losses and it might cause lower derivatives participation, yet still without dissolving the 'propensity to a systemic risk'.

..It boils down to this.. the bill suggests that the TBTF Banks should still aim to be super-profitable, and then create new banking firms with the proceeds rather than keeping earnings entirely on the books. (Gosh, I do apologise to the people who work in the FinServ reading this).

This Bill fails in asking how the financial system created instruments that were too risky. Yes, Bankers are Greedy. But that isn't the answer. Are shareholders Greedy? Is the Federal Reserve greedy?
The point is that the Banking system is designed to channel Capital efficiently and that is synonymous with ROI. Right now, as China, India and Brazil, possibly, competent to cater to their own capital requirements, the massive edifice of Anglo-Saxon Capitalism has Capital on hand with very little place for it go- hence the disproportionate activity in the Derivatives market.

The aim of the Bill is not up-to-date with the current situation. Financial Reform now means some sort of integration with the other regional currency spheres -simply because the US is fully capitalized and is now eating its own tail.

Similarly, Global Capital available for investment outshines any National Spending Requirements, anywhere. Logically then, to keep the Derivatives market some of that income needs to be channelled out from the framework of any Corporations' interest. Anaethma, Chaos, but still inflationary.

[Anonymous]

Shorter Chris Dodd: "Down here it's just winners and losers and don't get caught on the wrong side of that line."

(Shamelessly stolen from Springsteen's Atlantic City, which also contains the phrase, "debts that no honest man can pay," which too, somehow, seems apropos here)

[Papasmurf]

This is useless stuff.  If there was any resolve to fix the problem, they would prosecute the fraud that caused the current situation.   The "crisis of confidence" is caused by failure to enforce the rule of law.

[Anonymous]

It is opposed by: (1) the Senate republicans, (2) Barney Frank, (3) the administration, (4) the state banking departments' trade association, and (5) the state insurance commissioners. In short, it is DOA.

[Anonymous]

Dodd is like the little rattle snake caught in the cold snow covered river,
Snake:
Please mister tax payer carry me to the other side,
Taxpayer:
No way you will bite me.
Snake:
No way you have caught me I am to cold and I need you to trust me.
Taxpayer:
Why should I trust you?
Snake:
Trust me I have seen the light I will do nothing but good now.
Taxpayer:
OK
picks up the snake puts him in is coat lets him warm up gets him to the other side(bailout)river. OUCH you bit me you promised you wouldn't when we elected you. NOW I AM GOING TO DIE
Snake:
What do you expect I am a snake(paid politician)

Dodd writing a bill when he is bought and paid for.RIGHT!!!

He doesn't read them how could he write one.
Oh that's easy Clue=Can you say Lobbyist

[Anonymous]

Any bill 1100 pages long is a guarantee that a whole lot of somebodies are trying to pull something.

The problem with a one sentence bill is in the definitions. Those were stimulus payments not bailouts. How could they be bailouts when none of those companies were in trouble? They all passed the stress test.

[George Washington]

Senator Dodd's Bill: Trying to Prop Up a Broken System

[Rainman]

+ 100 GW. This is a misdirection play to cut the gonads off the Sander's bill. No way this dude would be spouting these lesser cures if not to throw the hounds off the scent. And it's a lot of good sounding bullshit in a thousand page packet.....enough paper to convince the voters back home he has seen the light !!

Funny. This guy is the same farmer who left the barn door open for the horses to run off.

[Zippyin Annapolis]

1) Big banks still get to preserve their fat OTC derivative margins;

2) Big banks will not be broken up--others will pay for the resolution authority;

3) The SEC will be self funded and will be given a blank check to do whatever they want with no real checks or balances--they can spend $2B and still not catch Bernie Madoff;

4) Jump ball on who really regulates the big banks--of course that can be nirvana for them;

5) A little tougher on CRAs;

6) Created a Consumer Financial Products Agency;

7) A systemic risk regulator that is also jump ball as to who it is and how it avoids regulatory capture--again just what the big banks need to evade, obscure  and leverage.

25 out of 100%. D-

[WaterWings]

Uh, like (scratches head) Glass-Steagall - "capital requirements" are part of the slavery system. Make banking boring again or else!! Fire everyone at the FDIC! I'd rather see food stamp payments go up than Sheila get another paycheck!

Gddmnt! Just follow Basel II and III accords and we'd be in a helluva lot better shape. Of course, to do that means millions would die since pretty much everyone in first world countries relies on happy truckers making timely deliveries to supermarkets.

So, everyone keep dancing - even if the music turns off!

[par068]

Now they are going to have to have the top traunch's of MBS's rated AAAA

Then all will be fine again.

[Miyagi_san]

 Just look at the author and the answer will come...election. The horse, cow, chickens and pigs have left the barn and he wants to fix the latch.

[cthulhu]

Just as a general note, you can tell it's full of garbage by placing it on a standard postage scale. Nothing needs to be 1,000+ pages if it's all obvious good ideas -- you could be banging 'em out at three per day and by the time you get around to the last ones, the first ones would have had a month or two to work.

Instead, the sheer heft of the bill means that it's full of sugar to help the medicine go down. And the more obvious and voluminous the sugar, the more bitter and poisonous the "medicine" -- and the better it will be hidden.

So when there's a top-line "End Too Big To Fail", there's going to be a "section 1446, paragraph 2, option (b) is amended to include 'or his delegate' after 'Secretary', and clause (ii) is hereby removed" which allows anyone in the Treasury Department to do anything they please with no congressional oversight whatever. [Illustrative language is completely invented, assumes "(ii) any actions under this section can be commenced only after approval of the Senate".]

[Anonymous]

There are some, most, fairly sophisticated types here. Why would any of you actually believe the Dodds/Sanders feint?

It doesn't matter a smidge, what either of these bills say.

The introduction of a bill, particularly by someone like Dodd, who has suckled for decades at Lord Blankfein's saggy tits, is nothing if not an obfuscation, designed to take up a universe of bandwidth, ink, and media talking heads' time in endless 'debate'. This is the fiery trashcan down the street from bank ploy so revered by our government to keep the status precisely at quo.

And what are the penalties in each of these bills?

The laws already there in a variety of forms if only someone had enough guts to prosecute these gypsies, tramps, and thieves.

Cuomo seems to have dropped out for Kalki knows what kind of emoluments.

[Anonymous]

There are some, most, fairly sophisticated types here. Why would any of you actually believe the Dodds/Sanders feint?

It doesn't matter a smidge, what either of these bills say.

The introduction of a bill, particularly by someone like Dodd, who has suckled for decades at Lord Blankfein's saggy tits, is nothing if not an obfuscation, designed to take up a universe of bandwidth, ink, and media talking heads' time in endless 'debate'. This is the fiery trashcan down the street from bank ploy so revered by our government to keep the status precisely at quo.

And what are the penalties in each of these bills?

The laws already there in a variety of forms if only someone had enough guts to prosecute these gypsies, tramps, and thieves.

Cuomo seems to have dropped out for Kalki knows what kind of emoluments.

[Anonymous]

I agree with anon #126443 this is all about getting the american people used to 1900 page bills. Get the mind stretched out to 1900 pages and in a couple of months health care just slips right in no grease. Kinda like that word Trillion.

[carbonmutant]

"What's missing?"

Who are these new superpowers going to be given to?

[Green Sharts]

Since Chris Dodd is suggesting that consolidating financial regulatory power in one government agency would save us from another financial and economic meltdown, could he point to one senior person in government in the last 10 years who saw this train wreck coming?  I can think of plenty who enabled it before or during their tenures in government: Bob Rubin, Hank Paulson, Tim Geithner, Alan Greenspan, Ben Bernanke, Chris Cox, Arthur Levitt, Phil Gramm, Barney Frank, etc.

The only relatively senior official in government who I'm aware of that tried to rein in at least part of the madness in the financial sector was Brooksley Born, and she was ostracized and stripped of regulatory power until she gave up and resigned.

Congress is such a tool of the financial services industry that it forbid the FDIC from collecting deposit insurance premiums from member banks from 1996-2006.  And Dodd wants to pretend a federal regulatory agency subject to political pressure from the President and Congress would risk throwing cold water on the economy in a future boom to prevent a bust? 

[sgt_doom]

While I'm tempted to read it, I'm still perusing that pile of crapola called the "healthcare reform" bill (geez, I'm already nauseated....).

I find it mucho difficult to believe that Chris Dodd, given both his track record and his genetic history (his daddy, the previous generation senator, had three pieces of legislation passed in congress to curb his considerably corrupt ways --- these involved his becoming a registered foreign agent for every corrupt [and actually a few fairly decent!!] dictator on the planet), I find it difficult to accept that he changed is ways and is now a white hat.

[ahab]

how does this jive w/ Bernie Sander's bill to break up the TBTF banks

[JohnKing]

Just write a one sentence bill.

"The government/taxpayer will no longer bail out anyone."

[Anonymous]

if it's from christopher "i am freddie mac's butt plug" dodd i can assure you that it is bad....

[Anonymous]

The right question always is: Bad for WHOM, or, to see it the other way: Good for WHOM. It seems obvious that any decision is good for somebody, and bad for somebody else.

[Anonymous]

it is untrue that any decision must be of a
win-lose nature....

in this case the legislation is bad for those
seeking limited and unconcentrated government....

the ideal conspiracy aggregates power to destroy
opposition and competition....this is the
ideal conspiracy....

concentration makes it easier for the vampire
squids rotate their slime in and out of
government sachs departments...