Revised US banking bill set to shake up consumer protection

City A.M. Reporter
A REVISED bill on financial regulatory reform is expected to be unveiled this week in the US Senate by Democratic Banking Committee chairman Christopher Dodd.

The bill will be the next step in a long drive by the Obama administration and congressional Democrats to tighten bank and capital market oversight.

Dodd is expected to call for creating a financial consumer protection watchdog as a division of the Federal Reserve, rather than as an independent agency, in an attempt to overcome the biggest obstacle to bipartisan support for reforms.

Obama last year proposed an independent US Consumer Financial Protection Agency (CFPA) to regulate mortgages, credit cards and other financial products. The White House still favours that approach.

But lobbyists for banks and Wall Street firms, whose profits would be threatened by the CFPA, months ago made stopping it their top goal in a broad push to weaken reforms.

Dodd is also expected to call for a modest streamlining of the patchwork bank supervision system. The Federal Reserve may keep oversight of large bank holding companies, such as Citigroup and Bank of America, but surrender its responsibility for some state-chartered banks to the FDIC, which oversees other state-chartered banks.

The Office of Thrift Supervision, which polices thrift institutions, is likely to be closed, with its operations merged into the Office of the Comptroller of the Currency.