Wide-ranging financial overhaul proposed for US

The chairman of the US Senate Banking Committee introduced a financial regulation reform bill yesterday that leaps beyond earlier proposals, calling for new government agencies on financial stability, bank supervision and financial consumer protection.

Senator Christopher Dodd, a Democrat, released the bill after intense closed-door negotiations, raising the ante in a debate over tighter bank and capital market regulation that has been going on for months since last year's financial crisis.

The measure was expected to win little or no support from Republicans, setting the stage for still more debate ahead, with analysts expecting no final Senate action until 2010.

Dodd, who faces a tough re-election challenge next year in his home state of Connecticut, called in his bill for a new super bank regulator, as expected, to be called the Financial Institutions Regulatory Administration, or FIRA.

The new agency would consolidate the bank supervisory powers of four current regulators and abolish the Office of Thrift Supervision and the Office of the Comptroller of the Currency. The Federal Deposit Insurance Corp and the Federal Reserve would lose their roles as direct bank supervisors.

The Dodd bill goes further than earlier proposals from the Obama administration and one under development in the House. Both seek more modest centralization of bank supervision.

Dodd's bill also calls for creating a financial stability agency. Previous proposals have focused on establishing a council of existing regulators to police systemic risks.

The Dodd bill would establish a National Insurance Office, which would be the first attempt by the federal government to monitor the insurance industry. The House and administration proposals have taken similar approaches.

As expected, Dodd's bill backs the administration's call for creating a Consumer Financial Protection Agency. The bill proposes that it be funded through fees charged to banks with $10 billion or more in assets and that the Federal Reserve transfer money annually to the agency.

The Federal Deposit Insurance Corp would be the primary agency for unwinding troubled financial firms, with the use of a "systemic resolution fund," under the bill. The cost of dismantling troubled companies would be recouped afterward through assessments on other financial firms.

The House of Representatives is on track for a final vote on financial regulation reform before the end of the year.

The House Financial Services Committee has already approved measures on credit rating agency oversight, derivatives market regulation and consumer protection. In July, the full House approved a bill to put new curbs on executive pay.

In June, the administration released more than a dozen proposals for financial regulation reform, with the aim of preventing a repeat of last year's financial crisis.