US senators wrestle with Fed bank oversight issues

March 8, 2010

   By Kevin Drawbaugh and Rachelle Younglai
   WASHINGTON, March 8 (Reuters) – The Federal Reserve could retain oversight of large bank holding companies under a scaled-back regulatory reform plan being considered by key senators, but important questions remained unanswered, lobbyists said on Sunday.
   In a retreat from a bold proposal to streamline a patchwork bank regulatory system, lawmakers were considering keeping supervision of companies such as Citigroup <C.N> and Bank of America <BAC.N> at the Fed, as Reuters reported in February.
   It was still unclear, lobbyists said, if the Fed under the  evolving plan would be an “umbrella supervisor,” continuing to rely on other agencies for detailed bank exams, and how many companies might be put under the Fed.
   One option, they said, was to assign holding companies with assets of $100 billion and up to the Fed, which would include nearly two dozen major firms.
   Other, more expansive options were also being considered, with Senate Banking Committee Chairman Christopher Dodd expected to unveil legislation as soon as this week after months of negotiations with fellow Democrats and Republicans.
   (For a Factbox on the keys to financial regulation reform in the U.S. Senate, double-click on [ID:nN05256609])
   Regulatory reform is a top domestic priority of President Barack Obama, who wants to crack down on banks and capital markets following the worst financial crisis in decades.
   Dodd in November called the Fed’s past performance as a banking supervisor and consumer protection watchdog an “abysmal failure.” When he made that remark, he proposed consolidating bank supervision into a super-cop for the industry to be called the Financial Institutions Regulatory Administration, or FIRA.
   (For a Factbox on key players in reshaping U.S. financial rules, double-click on [ID:nN02168734])
   But the FIRA proposal has unraveled as Dodd has discussed a range of compromises with Republicans and moved closer to embracing regulatory reforms watered down from a sweeping bill approved in December by the U.S. House of Representatives.
   (For a Factbox on how U.S. banking regulation is structured today, please double-click on [ID:nN26145675])
   The FIRA would have streamlined the bank oversight duties of the Fed, the Comptroller of the Currency, the Federal Deposit Insurance Corp and other agencies.
   The Fed in recent weeks has pushed hard to preserve its role as a supervisor. Senators are discussing doing that up to a point, but stripping the Fed of its job as supervisor of a large number of state-chartered banks.
   Dodd was said to be leaning toward reassigning those banks to the FDIC, which already examines many other state-chartered banks not in the Fed system, lobbyists said,
   Dodd also plans to call for closing the Office of Thrift Supervision, which regulates thrift institutions.
   On Friday, Dodd said he was uncertain whether bipartisan support for a compromise reform bill could be achieved. (Editing by Peter Cooney) (For a Scenarios on how the U.S. financial regulation fight might play out, double-click on [ID:nN04129297]) ((kevin.drawbaugh@thomsonreuters.com; +1 202 898 8390;
  Fax: +1 202 488 3459 )) Keywords: FINANCIAL REGULATION/FED
  
Monday, 08 March 2010 06:06:36RTRS [nN07145510] {C}ENDS

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