Senator Christopher Dodd, chair of the Senate Banking Committee, discussed his new unveiled financial reform bill with Judy Woodruff on PBS Newshour last night. Dodd's version of the bill would give the Federal Reserve the power to regulate any firm with more than $50 billion in assets and would embed a new consumer protection agency within the Fed.Woodruff asked Dodd about the critics who say the bill is too weak because it puts the consumer protection agency within the Fed, where there are conflicts of interest. Dodd replied that the consumer protection agency would have a leader appointed by the president and confirmed by the U.S. Senate; that it would have an independent source of funding; that it would have independent rule-making authority; and that it would have the authority to do examinations. Woodruff pressed him on this point:
JUDY WOODRUFF: But why house it at the Fed? SEN. CHRISTOPHER DODD: Well, because... JUDY WOODRUFF: I mean, after all, this is the agency the critics say didn't stop the financial collapse from happening. SEN. CHRISTOPHER DODD: Well, I was one of those critics. But, in the last couple of years, they have done a better job -- but, again, missing the point. It's being housed there. Why there? Because, if it's not going to be freestanding -- the votes don't exist for that -- which of the prudential regulators do you locate it? At the OCC? Consumer groups don't like that at all. The FDIC? There was some support for that idea. I thought the Fed made good sense. It was proposed by Senator Corker and others. And, frankly, one of the reasons why it's important is because this agency will be funded out of Fed funds, reserves, not that the Fed has any control over those funds. If I went and asked for assessments on financial institutions or depended on an appropriation to fund the agency, we have seen what other administrations and Congresses can do in starving things like the Federal Trade Commission and others. And, so, I felt this probably is the best choice of the choices available to me. And, again, we will go through a debate and discussion about this. But I think it makes better sense there than the other alternatives, other than freestanding, for which there didn't seem to be the support.Asked why his bill gives the Fed jurisdiction over institutions with more than $50 billion in assets, Dodd said, "The idea was to create clarity and accountability, which is what we have done with this bill. So the Fed has jurisdictions over non-banks with assets over $50 billion. National banks will be controlled by the OCC, state banks by the FDIC, and holding companies of less than $50 billion would also be under their jurisdiction. In the past, Judy, you had overlapping jurisdictions, creating a lack of clarity, a lack of accountability, people pointing the finger at different regulatory bodies as to whom was responsible for not doing their job."