Senator Dodd Unveils Bank-Reform Bill

The measure's consolidation of bank agencies is one of the big departures from the financial-reform efforts of the House and the Obama Administration

By Theo Francis

Senator Christopher Dodd, the Connecticut Democrat who heads his chamber's Banking Committee, unveiled on Nov. 10 a sweeping, 1,136-page regulatory reform bill that would consolidate financial regulators, impose higher capital requirements on financial institutions, remake the derivatives industry, and shift consumer protection from an overlapping patchwork of regulators to a single new commission. But some in the financial-services industry aren't rushing to read it.

"Given the shredding that committee is likely to give it in markup," says one banking analyst at a big money manager, "I think there are probably better uses of time."

In many ways, Dodd's bill is a distinct departure from proposals floated by the Obama Administration and in the House of Representatives. And it has already drawn barbs from the banking industry and companies that use derivatives, both of which spend heavily to lobby Congress. But it remains a starting point for long and likely convoluted negotiations among the Senate's Democratic leadership, the Republicans who could block the bill with the help of just a few conservative Democrats, and the financial-services industry, which is regaining some of the clout it lost in the financial crisis.

In other words, a lot will change before the Senate passes a regulatory reform measure—and then that measure still must be reconciled with the bills that Barney Frank (D-Mass.), the powerful chairman of the House Financial Services Committee, is crafting. Frank's legislation will surely differ substantially in at least some areas.

Glimpse of Potential Final Legislation

Dodd and his allies acknowledged as much in introducing the bill at noon on Tuesday. "It's broad, it's deep, it's complicated; I look forward to the discussions," said Senator Jeff Merkley (D-Ore.). Senator Mark Warner (D-Va.) said simply: "There are parts of this bill that I think are going to need more discussion.…I look forward to not only working with our colleagues, but our colleagues on the other side of the aisle."

And Merkley and Warner are among the bill's supporters. (They also praised many of the bill's features.) Dodd himself invited input from GOP senators.

Still, the long-awaited legislation—Dodd has talked about introducing a comprehensive reform bill for months—offers a glimpse of some elements that are likely to survive in any final legislation that is passed.

Dodd's proposals to reform the derivatives market look similar to those in the House Financial Services Committee's measure; both seek to push most derivatives trading onto exchanges, in an effort to improve transparency and market stability. "The guts of the derivative part is the same as the House bill," says Brian Gardner, a policy analyst for Keefe Bruyette & Woods (KBW) in New York.

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