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Senate Considers Amendments to Financial Reform Bill

Over the past two days, senators have begun considering a handful of the more than 200 amendments filed to the massive financial reform bill aimed at overhauling the U.S. financial system.

Already, a few key amendments have passed.

Regional Feds Retain Oversight: The Federal Reserve has been fighting hard against a provision in the original bill, sponsored by Sen. Chris Dodd, D-Conn., that would have moved oversight of smaller banks (with less than $50 billion in assets) to the FDIC. That would have left the regional Feds, like those in Dallas, Kansas City, and St. Louis, with just a handful — or even zero — banks to oversee. Under the amendment passed Wednesday, smaller banks may choose whether to be regulated by the Fed or the FDIC, which continues the current policy.

Small Businesses Exempt From Consumer Regulations: Part of what makes the proposed consumer protection agency so politically controversial is what businesses it would regulate. On Wednesday, an amendment sponsored by Sens. Olympia Snowe, R-Maine, and Mary Landrieu, D-La., passed that would exempt small businesses from oversight, as long as the business meets a three-pronged rule for exemption.

Auditing the Fed: Sen. Bernie Sanders, I-Vt., has been pushing for more congressional oversight of the Federal Reserve for over a year. But the amendment that passed 96-0 on Tuesday was a much watered-down version of his original proposal. Instead of giving Congress the power to audit the Fed’s interest rate decisions, there will now be a one-time audit of the Fed’s emergency actions since 2007. It also compels the Fed to release the names of institutions that have received loans from the central bank since the beginning of the financial crisis. The Senate rejected another amendment that would have required repeated audits.

Banning ‘Liar Loans’ and Mortgage Kickbacks: By a 63-36 vote Wednesday, the Senate banned so-called “liar loans,” in which borrowers are allowed to overstate their incomes for bigger mortgages. Now, lenders will have to verify income and that borrowers can pay. The same amendment also bars mortgage lenders from offering bonuses or incentives to brokers who steer borrowers to higher-interest loans.

Many major issues are still in play and being debated — including the regulation of derivatives, whether a federal consumer regulator will be able to preempt state regulators, and whether banks should be allowed to trade with their own money, known as proprietary trading — and action on those amendments are expected this week and into nearly next.

Dodd is pushing for a faster pace, hoping for a Senate vote on the full bill next week.

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