By Sari Gelzer, t r u t h o u t

Tuesday 10 November 2009

Senate Banking Committee Chairman Christopher J. Dodd (D-Conn) unveiled his proposal for sweeping financial regulation reforms on Tuesday.

The proposal, reports Reuters, will consolidate the federal policing of banks into a new body called the Financial Institutions Regulatory Administration (FIRA).

In a press conference, Dodd said that merging the institutions that currently regulate banks is a positive step in ensuring the security of the American economy.

"For firms that play by the rules, this single prudential regulator will provide clarity, cut red tape and make it easier to compete," Dodd said. "But those institutions that would undermine the security of our economy will no longer be able to shop for the weakest regulator."

Currently, banks can choose who will be their primary regulator.

Dodd's plan, which merges all four bank regulators, goes farther than both the House and the Obama administration, reported the New York Times. The authority of the Federal Reserve and the Federal Deposit Insurance Corporation are preserved in the House and White House plan, but the Office of the Comptroller, responsible for federally chartered banks, and the Office of Thrift Supervision, which supervises savings and loans, are combined.

Aside from creating a federal agency to regulate banks, Mr. Dodd's plan also creates two more federal agencies focused on protecting consumers and dismantling failing institutions, reports the Associated Press.

Democrat Sen. Mark Warner (D-Va.), an influential moderate, praised the bill because he said it would help prevent future government bailouts. "Never again should the American taxpayers have to hear about 'too big to fail,' where the American taxpayer has to pick up the slack," Warner said.

The New York Times reports that the Securities and Exchange Commission will benefit from Mr. Dodd's plan most because of the greater resources it will receive with its increased authority.

The financial industry and regulators opposed Mr. Dodd's plan. "The Independent Community Bankers of America said the diversity in the size of banks should be reflected through a diversity of regulators," Reuters reported.