Financial Regulatory Debate Continues

The debate over financial regulatory reform continues in the U.S. Senate according to a report from Bloomberg today. There seems to be agreement on the ultimate goals of regulatory reform.  However, senators do not seem to agree on where the responsibilities for regulation should reside.  Here is an update on new legislation that is currently in the works.

Senate Republicans led by Richard Shelby are drafting an alternative to financial-regulation legislation that Senator Christopher Dodd is developing after bipartisan talks collapsed this month, two Shelby aides said. Shelby’s plan will likely aim to create a consumer protection unit within a new bank regulator instead of the standalone agency sought by Dodd and President Barack Obama, said the aides, who requested anonymity because the talks are private. It would shield taxpayers from costs of unwinding systemically important failed financial firms, the aides said. Also under consideration is a consolidated bank regulator, one aide said. The idea is supported by Dodd, who proposed eliminating the Office of Thrift Supervision and Office of the Comptroller of the Currency, and moving their powers, along with the bank-supervision powers of the Federal Reserve and the Federal Deposit Insurance Corp., to the new agency.

This alternative bill will also address how best to tackle regulation of systemic risk.  Currently, discussion continues around establishing a regulatory council led by the U.S. Treasury that will provide systemic risk oversight.  However, there continues to be doubt about the effectiveness of regulating by committee.