The Good the Bad and the Ugly in the Dodd Bill

The Good

1) Capital requirements and leveraging requirements to be set by
regulators (although some reformers would like these set in law to makes
sure they do the job).
2) Creates a council of systemic risk regulators called a Financial
Stability Oversight Council, which is generally a good idea. We don't
want to just leave it to the Federal Reserve.
3) Obama's "Volcker Rule" included, not perfect, but at least it made
the cut.
4) Consumer Financial Protection Agency remains a
strong institution with rulemaking and enforcement authority over banks
and nonbanks.
5) No new preemption of state attorneys general.
6) Credit rating agencies, which gave AAA ratings for toxic
mortgage-related securities, can be sued for damages if they don't do
their job.
7) Good reforms of the Federal Reserve system, including: NY Fed
President will be appointed; no bank selection of directors; no bank
personnel as directors; and a annual Fed audit.

The Bad

1) No break up of the too big to fail banks, no prevention of too big
to fail, just a costly process for unwinding the firms once they do fail
and a $50 billion industry fund to pay for such a collapse.
2) No caps on how large a bank can grow. The size limitation that was
included as part of the Volcker rule just says that companies cannot
merge to become greater than 10 percent of all liabilities in the
system. This enshrines the too big to fail institutions that do exist
and does not place a limit on the size that they can achieve
organically.
4) Continuing derivatives loopholes for foreign exchange traded
derivatives and there appears to be a problem with the lack of
regulation for non-clearing house participants.
5) No real reform of credit rating agencies, such as by creating public
or private competition for these failed institutions.
6) The Consumer Financial Protection agency will be housed at the
Federal Reserve a move to appease Republicans that will undermine its
legitimacy with the public. CFPA will not have authority over all banks,
just the largest banks, a bad idea sure to encourage risky behavior on
the part of smaller banks. CFPA authority over "large" payday lenders
(exempting how many?). Systemic risk regulators of the Financial
Stability Oversight Council can override CFPA rules with a 2/3 majority
vote and just one regulator could delay CFPA rules. These are bizarre
provision, isn't it time to give consumer representatives a veto over
banking regulators and not visa versa?

The Ugly

Usually a draft like this sets the high water mark. With 1,500 bank
lobbyists on the hill and $390 billion spent on finance industry
lobbying in 2009, the public will need to weigh in to fix the problems
that do exist in the bill and hold off provisions that will make the
bill worse. Get involved! Send an email to your legislators at www.BanskterUSA.org.