The House & Senate are Divided Over Financial Reform
Thursday, November 05, 2009PAUL KANGAS: There's a split emerging in Washington, DC over how best to clean up the financial industry. Rewriting the nation's financial rulebook is a top priority of President Obama and Democratic lawmakers. But there are now far different plans emerging from the House and Senate and getting a bill on the president's desk will not be easy. Stephanie Dhue reports.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: It took the Federal Reserve 14 years to use the power it had to rein in predatory mortgage lending. Senate Banking Committee Chairman Chris Dodd says if they didn't use it, they should lose it. And that's one reason he wants to replace the alphabet soup of bank regulators with a brand new one.
SEN. CHRIS DODD, BANKING COMMITTEE CHAIRMAN: I'd like to begin there. I think that's -- because otherwise what you get is what they call charter shopping. You create within your financial institution a definition of yourself that allows you then to pick the regulator and so you pick the weakest regulator, the one that's going to let you get away with murder on this stuff and then you end up with the kind of messes you did.
DHUE: That approach is at odds with legislation the House is writing. The House bill puts the Federal Reserve in the driver's seat, supervising the largest financial firms. But Dodd thinks that doesn't do enough to change the system.
DODD: We want to go back and look at what went wrong and where were the gaps and they were huge gaps. One where there was no regulation, number one and that's serious enough and two, where they have regulation, but there were no cops on the beat.
DHUE: Dodd does support a new consumer financial protection agency, which is also being championed by the House and the administration.
DODD: How silly it is that -- if you buy toys for your children and they're wrong, you can call somebody and fix it. You can take something off the market. Yet someone absolutely rips you off on a credit card or an overdraft fee, you can't call anybody and that's got to stop.
DHUE: But the banking industry wants to put a stop to that new consumer watchdog, saying it's the wrong approach. The Banking Committee's ranking Republican, Richard Shelby says it's critical to keep consumer protection with the regulator who oversees safety and soundness of banks.
SEN. RICHARD SHELBY (R), ALABAMA: I believe that any consumer protection should be in the same office under the same roof with a regulator that deals with all of it.
DHUE: There is an area of broad agreement. Lawmakers want tougher, more effective regulation. But getting there is clearly the hard part and could take until the end of the year, but analysts say probably much longer. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
