US Senate panel introduces major financial reform package

Nov 10, 2009, 16:48 GMT

Washington - Lawmakers in the Senate on Tuesday introduced proposals that would overhaul US financial regulation in the hopes of preventing Wall Street from driving the economy into another crisis.

The legislation put forward by Senator Christopher Dodd, the Democratic chairman of the Senate's Banking Committee, is considered more ambitious than what has been proposed by President Barack Obama or Dodd's counterparts in the House of Representatives.

Dodd's bill would consolidate a patchwork of bank regulators into one Financial Institutions Regulatory Administration. It would also create an Agency for Financial Stability that could monitor risks to the entire financial system.

Obama handed many of those extra powers to the US central bank, the Federal Reserve. The House of Representatives, which began discussing its version of the legislation last month, has mostly followed Obama's proposals.

Dodd said the Fed should return to its 'core enterprises' of monetary policy and warned that giving it additional responsibilities could erode its independence.

Dodd does preserve a centrepiece of Obama's plans: The creation of a Consumer Financial Protection Agency to protect from misleading practices by banks, credit card firms and others.

Wall Street's near collapse in September 2008 was largely brought on by risky and misleading loan offers to American homeowners. A record number defaulted on those loans as housing prices began to plunge in mid-2006.

'Ordinary Americans who did nothing wrong were paying a very steep price,' Dodd said at a press conference. 'They deserve real, meaningful change.

The Senate is still in the early stages of the legislative process. Both the House and Senate would have to agree on a common proposal before it can reach Obama's desk.