As the House Financial Services Committee voted Wednesday to support an amendment giving the federal government the power to break up large, failing private-sector financial firms, a senate committee chairman presented his reform proposal as part of the Democrats’ sweeping financial overhaul plan.
On Thursday, Sen. Chris Dodd (D-CT), chairman of the Senate Committee on Banking, Housing, and Urban Affairs, proposed his Restoring American Financial Stability bill to “create a sound foundation to grow the economy and create jobs.”
Opening remarks for markup on the proposed draft came from committee members Thursday. The full markup of the legislation, in which committee members offer amendments to sections of the bill, is scheduled for Nov. 30.
Highlights of Sen. Dodd’s proposal were outlined in a discussion draft, and include the establishment of three new federal agencies, and stopgap regulations that allow the government to “shutdown big companies that fail without threatening the economy.”
The Consumer Financial Protection Agency, proposed in the draft bill, would ensure “clear, accurate information” on “mortgages, credit cards, and other financial products,” while prohibiting “hidden fees, abusive terms, and deceptive practices.”
Another proposed agency is the Agency for Financial Stability, tasked with “addressing systemic risks” posed by companies, products, and activities that may spread risk in the economy. The bill outlines the agency’s federal powers, including its power to “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.”
The third agency proposed is a consolidation of various bank regulators and agencies, which includes the functions of the Federal Reserve and Federal Deposit Insurance Corporation (FDIC).
Treasury Secretary Criticized
The Obama administration continued its role in the push for regulatory reform when U.S. Treasury Secretary Timothy Geithner, speaking Thursday before the congressional Joint Economic Committee, echoed the Democratic Party call for further financial regulation and government oversight.
Secretary Geithner, the Obama administration’s point man on economic crisis issues, also faced outspoken criticism from some committee members over his role in the economic stimulus’s AIG bailout.
Rep. Kevin Brady (R-TX), in an exchange with Geithner, criticized his handling of the economy and AIG.
"Conservatives agree that as point person, you failed. Liberals are growing in that consensus as well," Rep. Brady claimed, according to a Fox News report. He then asked for Mr. Geithner to step down, saying that Americans “need a new economic team.”
Secretary Geithner is a former president of the New York Federal Reserve, which oversees the nation’s largest bank holding companies, and is also expected to police Wall Street activity. A recent government report has criticized the role the New York Fed played in the AIG bailout.
The bailout has become a symbol of frustration and outrage for some Americans, sometimes seen as an example of government waste and mismanagement. Other circles see the bailout as favoring Wall Street over the average worker, providing little relief in the form of job growth.