WASHINGTON (CN) – Senators debated legislation Thursday meant to overhaul the nation’s financial regulatory system with Republicans pursuing eternal resistance, already promising to offer a substitute for the draft legislation, saying it “requires a complete rewrite.” While the Democrats suggested the Republicans were tools of the lobbyists.
“We have concluded that this bill requires a complete rewrite,” Ranking Member Richard Shelby from Alabama said during the Banking, Housing, and Urban Affairs Committee hearing, where senators shared their initial thoughts two weeks before markup of the bill.
While answering questions from the media outside the hearing room, Shelby said the Republican bill “would be a big improvement” to the bill offered now but when asked how it would be different, he replied that such answers would have to wait until the bill comes out.
In responding to criticism, Chairman Chris Dodd from Connecticut said, “This proposal has been the focus of well-funded, well-orchestrated attacks by lobbyists from the very entities that created these problems.”
Republicans spoke out against the 1,130 page bill and urged senators to slow down in passing it, claiming it would enhance the ability of banks to use taxpayer money and warned of other unintended consequences.
Democrats maintained that the legislation addresses the regulatory shortfalls responsible for the recent financial crisis, and argued that it would decrease, not increase, the risk of taxpayer-funded bailouts.
“There will be a rush to become those that are too big to fail,” Idaho Republican Mike Crapo said, arguing that a single powerful regulatory agency would signal to companies an implicit government guarantee to step in and bail out large firms.
Dodd agreed that lawmakers must tread carefully. “We’re going to be in unchartered waters,” he admitted, but said the danger in taking too long is that progress will lose momentum.
He defended his bill. “Today, we meet the shadow cast by decades of inaction in which Washington has failed to deliver the substantial reform the American people need.”
The legislation echoes financial reform already making its way through the House. Like that bill, it would set up an independent Consumer Financial Protection Agency to oversee mortgages, credit cards, and other financial products, extend bank oversight to cover other financial institutions, and give regulators the authority to break up large firms they consider threatening to the financial market.
It would require companies to keep larger financial reserves as they increase in size, make companies that sell financial products keep a ten percent interest in the investment, and it would set up a fund that financial institutions with more than $10 billion in assets pay into to support the shutting down of faulty firms.
In promoting his plan to create a single Consumer Financial Protection Agency, Dodd noted the “gaping holes” in the nation’s regulatory structure and said Americans are looking for a single responsible party.
“These provisions send a loud, clear message to struggling families that someone will be watching out for them,” New Jersey Democrat Robert Menendez said.
Tennessee Republican Bob Corker noted the breadth and complexity of the bill in speaking against it. “I think if I went about the table, I could embarrass every senator here,” he said. “There’s a lot we don’t know about the unintended consequences of this legislation,” Corker said, adding, “If this bill became law as it is, we’d be talking about pandemonium in the world and I think the chairman knows that.”
Shelby said the institution receiving bailouts would be authorized to make unlimited payment to creditors. “This means that the Dodd bill permits creditors to receive 100 percent bailout from the Federal government,” he said.
Full markup of the bill is scheduled to begin the week after Thanksgiving.