WASHINGTON (CN) – Forgoing Republican support, Sen. Chris Dodd introduced a bill Monday that would impose tough new rules on Wall Street by handing the Federal Reserve broad new powers to regulate financial firms and crack down on risky lending. “Congress is not good at writing regulations,” Dodd said in explaining why the bill places reform in the hands of the Fed.
Dodd, the Connecticut Democrat who chairs the Senate banking committee, said in a press conference that the bill is about “getting back to clear functions and having clear lines of authority.”
The legislation would allow the Fed to extend its reach beyond banks to touch any financial company, writing rules for even small payday lenders. And it would be able to sanction any bank with more than $10 billion in assets for violating the rules, as well as any bank-holding company with more than $50 billion in assets.
The bill also leaves open the possibility to extend enforcement to other industries if regulators so choose.
The legislation would give the government power to wind down large and shaky financial institutions. Derivatives and other complex financial products would face stricter regulation and transparency requirements, and the government would have more authority to force banks to lower their risk.
Shareholders would also have more say in how their companies function.
Critics say the heightened regulations would restrain lending and oppose giving more power to the Fed, which drew popular condemnation for its failure to spot the housing bubble, its handling of interest rates and consumer protections and its role in bailing out large financial firms.
The bill appears to contrast with Dodd’s earlier criticism of the Fed, where he even proposed in a version of the bill mandating that the Fed be stripped of important regulatory powers.
Republicans, who maintain that they want new rules, have expressed disappointment with Democrats for pushing ahead on a strong measure without their support.
The expanse of the bill is broader than what Republicans had expected and supported, and it veers away from the version hammered out after weeks of negotiations between members from both parties, steering closer to what the White House initially proposed.
But Dodd said he is optimistic about getting Republicans on board, noting that there will be plenty of opportunity. “At any stage of the development of the bill, you can get that consensus,” he said. Markup of the bill is scheduled to begin next week.
Republicans have not offered an alternative to Dodd’s bill.
The push forward with an aggressive bill comes after increased pressure from the Obama administration, which has been working for a year to pass financial reform. Passage of the bill could garner political points with many Americans still angry with the financial sector.
The House passed a financial reform bill in December.