Talks resume in U.S. Senate on financial reform

February 11, 2010

WASHINGTON, Feb 11 (Reuters) – In an unusual move that cuts a senior Republican out of the loop, bipartisan U.S. Senate negotiations have resumed on financial regulation reform, the chairman of the Senate Banking Committee said on Thursday.

Committee chairman Christopher Dodd, a Democrat, said in a statement that he has begun talks on legislation with Bob Corker, a first-term Republican member of the panel handling a sweeping regulatory overhaul package.

Just six days ago, Dodd said he had hit an impasse with Senator Richard Shelby, the committee’s top Republican, in talks under way for more than a year.

The Obama administration has made tighter financial regulation a top priority for 2010. The U.S. House of Representatives approved a reform bill in December over the objections of Republicans and bank lobbyists.

“I am more optimistic than I have been in several weeks that we can develop a consensus bill to bring about the reforms the financial sector so desperately needs,” Dodd said in a statement on his dealings with Corker.

Corker told CNBC on Thursday that he is willing to work with Democrats on financial reform, saying it is “a piece of legislation that needs to be passed.” He said the Dodd-Shelby impasse would lead “toward a legislative train wreck.”

The U.S. Treasury Department said it welcomed Corker’s decision to work with Dodd to pass financial reform.

Disagreement over a proposal by President Barack Obama last year to create a consumer financial watchdog agency torpedoed the Dodd-Shelby talks.

Corker has also opposed the proposed agency. Last year, he called it “a tremendous overreach … way out of bounds.”

Dodd had introduced a comprehensive reform bill in November that was immediately rejected by Republicans. He then divided his committee into bipartisan teams of two senators each to address specific issues of dispute.

Dodd and Shelby were working on the proposed Consumer Financial Protection Agency (CFPA) — an idea that legions of Capitol Hill lobbyists for banks and Wall Street have been working to kill or weaken for months.

A spokesman for Shelby could not immediately be reached for comment.

The CFPA would be a new agency that centralizes consumer protection laws and staffs now scattered across several existing agencies, including the Federal Reserve.

Democrats back the idea because they say the Fed and other agencies did a poor job of protecting Americans from abusive mortgages in the run-up to the financial crisis of 2008-2009 that triggered calls for reform.

Banks and financial services firms oppose the agency as a direct threat to their profits and an administrative burden. Republicans say it would be an unneeded government intrusion on the private sector.

Dodd has discussed possibly downgrading it to something less than an independent agency, possibly making it a division of the Treasury Department.

(Additional reporting by Rachelle Younglai, Karey Wutkowski, Glenn Somerville and Kim Dixon; Editing by Leslie Adler)

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