FMCRC Congratulates Senator Dodd for his leadership for introducing a bold financial industry reform (see specifics of reform bill below)
“We congratulate Senator Dodd for his courage and leadership. But where is the leadership of Congressman Barney Frank and the House of Representatives on this issue? We are hopeful that Congressman Frank will take a note from Senator Dodd on Financial Industry reform. Minorities account for over 40% of the population in all
Senator Dodd Introduces New Financial Reform Proposal That Will Help All
Including the most important reform:
One Financial Industry Regulator
The Senate Banking Committee unveiled a new bill to reform regulations for the
The bill, drafted by committee chairman Chris Dodd (D-Conn.), would create the Consumer Financial Protection Agency, which provides consumers information when they shop for mortgages, credit cards and other products. The agency would prohibit hidden fees, abusive terms and deceptive practices.
Dodd made room for the Agency for Financial Stability, an independent agency with a board of regulators, who would identify systemic risks posed by the “too big to fail” companies, products and activities. If the agency finds that a company threatens the economy, it could require that company to divest some of its holdings.
New plans of a single federal bank regulator are in the new bill, which would attempt to eliminate overlap and “charter shopping,” where financial institutions choose the easiest regulator. The bill would end fee-funded regulators from “going easy on those they regulate to keep their business,” according to a summary of the bill. Dodd added: “This proposal will create a new architecture to make our financial institutions more transparent, more responsible, and more accountable to the American people. It will address the problems of the past, and look forward to the needs of the future.”
The following are highlights of the financial reform proposal introduced by Senator Dodd:
Closes Loopholes in Regulation: Eliminates loopholes that allow risky and abusive practices to go on unnoticed and unregulated – including loopholes for over-the-counter derivatives, asset-backed securities, hedge funds, mortgage brokers and payday lenders
Single Federal Bank Regulator: Eliminates the convoluted system of multiple federal bank regulators to increase accountability and end unnecessary overlap, conflicting regulation, and “charter shopping;” keeps in place the healthy dual banking system that governs community banks.
The Financial Institutions Regulatory Administration
• Independent: Headed by an independent chairman appointed by the President and confirmed by the Senate, a Vice Chairman experienced in state banking regulation, and a board including the chairmen of the FDIC and the Federal Reserve and two other independent members. It will be funded primarily by assessments on the industry.
• Single Focused Agency: Combines the functions of the Office of the Comptroller of the Currency and the Office of Thrift Savings, the state bank supervisory functions of the Federal Deposit Insurance Corporation and the Federal Reserve, and the bank holding company supervision authority from the Federal Reserve.
• Dual Banking System: Preserves the dual banking system, leaving in place the state banking system that governs most of our nation’s community banks.
• Separate Community Bank Division: Establishes a separate division within the new regulator to regulate community banks given the different supervisory issues they pose.
• Eliminates Charter Shopping: Stops financial institutions from choosing the easiest regulator, and stops fee-funded regulators from going easy on those they regulate to keep their business.
• Increases Accountability: Having a single regulator will mean an identifiable agency is held responsible for shortcomings in the banking system.
• Speeds Action, Increases Efficiency: Ends slow, cumbersome, coordinated rulemaking that creates extra red tape and inconsistent enforcement of the same rules by agencies. Overlaps impose unnecessary costs on regulated institutions and their customers.
• Focuses the FDIC and the Federal Reserve: The FDIC will focus on its jobs as deposit insurer and resolver of failed institutions, retaining backup examination authority over troubled banks and gaining additional authority to accompany the new agency on examinations of healthy banks and holding companies to ensure it has sufficient information to perform its insurance functions. The Federal Reserve will focus on monetary policy without being distracted by responsibilities for bank oversight and consumer protections. The Federal Reserve will continue to play a key role in assessing financial stability and have guaranteed access to financial institutions and any needed information.
The Agency for Financial Stability
The Agency for Financial Stability
• Strong and Independent: Governed by an independent chairman, appointed by the President and confirmed by the Senate, to provide insulation from political manipulation. The board will have 9 members including the federal financial regulators and two independent members. The board members’ diverse areas of expertise will strengthen the board’s ability to identify and respond to emerging risks throughout the financial system.
• Tough to Get Too Big: Writes increasingly strict rules for capital, leverage, liquidity, risk management and other requirements as companies grow in size and complexity, imposing significant costs on companies that pose risks to the financial system.
• Break Up Large, Complex Companies: Gives the regulators the authority to break up large, complex companies if they pose a threat to the financial stability of the
• Close Gaps in Regulation: Identifies unregulated financial companies that pose systemic risk and assigns them to a federal regulator for supervision.
• Lean and Mean: Expected to be staffed with a highly sophisticated staff of economists, accountants, lawyers, former supervisors, and other specialists. With just rule writing authority and no direct supervision, the agency can remain small but effective.
• Make Risks Transparent: Collects and analyzes data to identify and monitor emerging risks to the economy and make this information public in periodic reports and testimony to Congress twice a year.
• Oversight of Important Market Utilities: The Agency for Financial Stability will identify systemically important clearing, payments, and settlements systems to be regulated by the Federal Reserve.
Consumer Financial Protection Agency: Creates an independent watchdog to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, while prohibiting hidden fees, abusive terms, and deceptive practices.
The Consumer Financial Protection Agency
• Consumer Protections in
• Independent: Led by a 5 member board with an independent director. The Chairman of the Financial Institutions Regulatory Administration will have a seat on the board.
• A Watchdog with Real Teeth: Unites rule-writing, supervision, and enforcement for consumer protection in a single, stand-alone agency with broad authority to investigate and react to abuses as they develop.
• Able to Act Fast: With this agency on the lookout for bad deals and schemes, consumers won’t have to wait for Congress to pass a law to be protected from bad business practices.
• Educates: Creates a new Office of Financial Literacy.
• Regulates Shadow Banking Industry: Levels the playing field for insured banks by regulating the shadow banking industry, such as mortgage brokers and payday lenders, for the 1st time and ensures that companies offering customers the same products receive the same regulatory treatment.
• Accountability: Makes one agency accountable for consumer protections. With many agencies sharing responsibility, it’s hard to know who is responsible for what, and easy for emerging problems that haven’t historically fallen under anyone’s purview, to fall through the cracks.
• Tougher State Laws: Allows states to pass tougher consumer protections that apply to all lenders, preventing federal regulations from preempting stronger state laws.
• Works with Bank Regulators: Coordinates with other regulators when examining banks to prevent undue regulatory burden.
• Bases Supervision on Risk: Focuses resources on companies that pose the biggest risk to consumers – mortgage bankers, brokers, finance companies and the largest institutions.
Office of National Insurance:
Creates a new office within the Treasury Department to monitor the insurance industry, coordinate international insurance issues, and requires a study on ways to modernize insurance regulation and provide Congress with recommendations. Streamlines the regulation of surplus lines insurance and reinsurance through state-based reforms.
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