By Jim Kuhnhenn, Associated Press Writer
WASHINGTON (AP) — A new Democratic Senate bill to tame the financial markets would give the government new powers to break up firms that threaten the economy and would force the industry to pay for its failures.
Legislation unveiled Monday by Senate Banking Committee Chairman Christopher Dodd falls shy of the ambitious restructuring of federal financial regulations envisioned by President Barack Obama or contained in legislation already passed in the House.
But the bill would still be the biggest overhaul of regulations since the New Deal. It comes 18 months after Wall Street's failures helped plunge the nation into a deep recession.
A leaner Federal Reserve would gain new powers to regulate the size and the activities of the nation's largest financial firms. The bill would create a consumer protection bureau within the Federal Reserve to write regulations governing all lending transactions. Bank regulators, however, could appeal those regulations if they believe they would affect the health of the banking system.
In announcing his bill at a news conference, Dodd stood alone, a sign of the difficult task ahead of him in forging a bill that can pass the Senate.The breadth of the bill would touch all corners of the financial sector, from storefront payday lenders to the highest penthouse office suites on Wall Street.
The bill creates a powerful nine-member Financial Stability Oversight Council that could:
—Place large, interconnected financial institutions such as insurance conglomerate American International Group under the supervision of the Federal Reserve.
—Approve the break up of large complex companies if they pose a "grave threat" to the to the nation's financial system.
Such actions would require a two-thirds vote of the council.
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