In a turnaround for the central bank after months of public criticism, Senate Banking Committee Chairman Christopher Dodd was poised to release a bill that leans heavily on the Fed to fix the US financial system, sources said on Sunday. Not only would a new government watchdog for financial consumers be housed within the Fed, it would also retain much of its present authority over large bank holding companies and gain new authority over selected non-bank financial firms. Sources said the Fed would also continue supervising smaller, state-chartered banks now in the Fed system -- a change from an earlier proposal that would have transferred those banks to Federal Deposit Insurance Corp. supervision. The plans could yet change, sources said, with weeks to go before Congress completes its long debate on regulatory reform after the worst US financial crisis in generations tipped the economy into recession and shook markets worldwide.
With Republicans and bank lobbyists working to weaken and block new rules, the push for reform could fail in the Senate. That would hurt Democrats and President Barack Obama as they head into November elections already short on achievements. But the release on Monday of Dodd’s bill will move the Senate closer to a decisive vote.
