Dodd calls for finance-regulation overhaul

Sen. Christopher J. Dodd, chairman of the Senate banking committee, proposed on Tuesday a massive overhaul of the government’s financial regulatory system in a move designed to prevent another economic collapse, protect consumers and dismantle failing institutions.

The draft calls for more sweeping changes to how Wall Street does business than do proposals by the Obama administration and Democrats in the House of Representatives.

“This proposal will create a new architecture to make our financial institutions more transparent, more responsible and more accountable to the American people,” said Mr. Dodd, Connecticut Democrat. “It will address the problems of the past, but as importantly, if not more importantly, it also looks forward to the needs of the future.”

The measure, like a similar version passed last week by the House, would create an independent watchdog agency to give consumers new protections against excessive credit-card rate and fee increases, predatory lending practices and deceptive mortgages, which have helped fuel the nations economic woes.

The proposed Consumer Financial Protection Agency would aim to give consumers a clearer understanding of the complex fine print that is part of nearly every financial product.

The proposal also calls for an independent council of regulators to step in and “dismantle” failing financial firms deemed so large that their demise could damage the larger economy.

Mr. Dodd’s plan breaks with the House bill and the Obama administration’s proposal in that it would do more to scale back the powers of the Federal Reserve, which many lawmakers blame for the economic crisis.

The senator denied that his plan is meant to punish the Federal Reserve. Rather, he said, it was designed to return the Federal Reserve “back to its core enterprises.”

“There’s nothing punitive in this bill,” Mr. Dodd said.

Mr. Dodd’s proposal was expected to gain broad support among Democrats, but Republicans — including the banking panel’s top Republican, Sen. Richard C. Shelby of Alabama — haven’t signed on.

Wall Street also has voiced concerns about the Senate proposal, as it did with the House bill drafted by Rep. Barney Frank, Massachusetts Democrat, who is chairman of the House Committee on Financial Services.

The regulatory systems governing our markets need to be modernized, and the current debate should not be about more regulation, but smarter regulation, said David Hirschmann, president and chief executive of the U.S. Chamber of Commerces Center for Capital Markets Competitiveness.

Mr. Dodd said he actively will seek Republican input for the bill, which tentatively is scheduled for consideration by the committee in early December.