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Dodd’s Bill: What You Need to Know

Submitted by ekashner on April 29, 2010 |

Today, debate begins on Dodd’s financial reform bill in the Senate. At first, Senate Republicans worked to block debate on the bill, but have now decided to modify it. While the bill will likely change, here is what we have to go on so far. An update from the Associated Press this morning:



It’s long (1336 pages), it’s confusing, and it’s long. We are not even going to suggest the possibility that anyone has been able to read this thing cover to cover. Do you remember how long it took to go through just 253 pages of proposed corporate rule changes? Luckily, here are some more easily digestible resources to help you make sense of the bill, plus several thoughts on what this might mean for credit unions. I will let Sen. Chris Dodd (D-CT) give you an overview in his own words:



In this short press conference from March 24, 2010, hosted on C-SPAN, Sen. Chris Dodd (D-CT) and Rep. Barney Frank (D-MA) discuss their vision for proposed reforms for the financial sector. It seems likely that we will see some kind of financial reform come out of Congress and land on President Obama’s desk.

(Here’s Part 2, although it does not add much)

Additional resources:

Summary and Implications:

This list is by no means comprehensive, but these are some initial observations in having reviewed the bill and commentary on the bill. I highly recommend that you add a personal perspective below. We want to hear what these proposals mean for your individual credit union.

  1. This bill creates a number of new federal bodies, including but not limited to:
    •    Consumer Financial Protection Bureau
    •    Office of Financial Literacy (under the CFPB)
    •    Financial Stability Oversight Council
    •    Office of Nation Insurance (within the Treasury Department)
    •    Office of Financial Research (within the Treasury Department)
    •    Office of Credit Rating Agencies (within the SEC)
    •    Investment Advisory Committee (to the SEC)
  2. Eliminates the Office of Thrift Supervision. Existing thrifts will be grandfathered into the appropriate regulator (can either be the FDIC, OCC, or the Fed) and no additional thrift charters will be granted.
  3. Clarifies the responsibilities of banking regulators:
    •    FDIC will regulate all state banks and thrifts, and state bank holding companies with assets below $50 billion.
    •    OCC will regulate all national banks and federal thrifts, and national bank and federal thrift holding companies with assets below $50 billion
    •    The Federal Reserve regulates all holding companies with assets over $50 billion.
    •    The NCUA remains unaffected (save exceptions below)
  4. The CFPB has the “authority to examine and enforce regulations for banks and credit unions with assets of over $10 billion.” While only three credit unions would be affected by the current $10 billion dollar limit, there are no guarantees that bar will not be lowered.
  5. The CFPB, it would have the power to regulate “all mortgage-related businesses.” This would seem to suggest that the bureau has power over any mortgage lending credit union or CUSO.
  6. Even for institutions not covered by 4 and 5, the CFPB can “write rules for consumer protections governing all entities – banks and non-banks – offering consumer financial services or products.” The bill further states, “All consumer financial protection functions of the National Credit Union Administration are transferred to the Bureau.”
  7. The NCUA would not have a seat on the Financial Stability Oversight Council. It is unclear whether this is because Congress does not consider credit unions systemically important or does not consider credit unions to be significantly risky. Further, it is unclear whether credit union exclusion from the conversation on systemic risk is a boon or bane for the industry.

Status:

Financial reform currently ranks as the top priority for Congress as the return from recess. There is a sister bill in the House, which, as Barney Frank notes, is extremely similar to the Senate bill (this is why we’ve chosen to focus on just one, as most resources and observations are equally applicable to the other). Both have cleared committee, and will likely receive an up or down vote in this Congressional session. If this happens, reconciliation will likely be a very quick process, and there would be few reasons why President Obama would not sign the combined bill. The main thing to be seen will be how aggressively Democrats push this bill, as they did with health care, and to what extent Republicans engage or block debate.

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