Senate GOP blasts financial reform proposal

Senate Banking, Housing and Urban Affairs Committee Chairman Christopher J. Dodd’s proposed overhaul of the financial sector’s regulatory system is likely to get little or no bipartisan support, as several Republicans on Thursday blasted the plan as a gateway to more Wall Street bailouts.

Sen. Richard C. Shelby of Alabama, the panel’s top Republican, said the bill would institutionalize the notion that some financial institutions are “too big to fail” - a reasoning given for last year’s taxpayer-funded corporate bailout.

“Unfortunately, the Dodd bill does not end ‘too big to fail.’ In fact, it significantly expands the federal government’s ability to bail out not only banks, but any large, politically connected company,” said Mr. Shelby during the committee’s Thursday markup of the measure.

“Mr. Chairman, if the end result is increased moral hazard and greater taxpayer exposure, this entire legislative effort will have been in vain.”

Mr. Shelby’s criticism is noteworthy because he and Mr. Dodd, Connecticut Democrat, have a history of working well together on the panel.

The normally reserved Alabama senator, while disagreeing with Mr. Dodd, refrained from vitriol, adding that he was hopeful a compromise could be hammered out.

“I will be opposing this legislation - not because we disagree on its ends, but rather on its means,” Mr. Shelby said. “For this reason I remain hopeful that we may yet find some common ground.”

Committee Republican Sen. Judd Gregg of New Hampshire called Mr. Dodd’s plan “seriously flawed.”

“It simply goes too far addressing problems of the past rather than focusing on what is truly needed: a sound and efficient regulatory structure that will help consumers, employers and foster economic growth,” he said.

Mr. Gregg added that the Dodd proposal risks “severe market disruption” through unintended consequences.

“Piling on layers of complex bureaucracy will only blur the lines of regulatory accountability,” he said.

But Mr. Dodd defended his bill by saying it would fill “gaping holes in our regulatory structure” by replacing the “myriad government agencies that failed to rein in risky schemes of large banks and Wall Street firms.”

“No longer will the Federal Reserve’s emergency lending authority be used to prop up a failed institution,” he said. “Our regulatory system was created in bits and pieces over decades. And it shows.”

Mr. Dodd’s measure, like a similar version passed recently by the House, would establish new regulations and protections in an attempt to avoid future economic meltdowns.

It calls for an independent watchdog agency to give consumers new protections against excessive credit-card rate and fee increases, predatory lending practices and deceptive mortgages that helped fuel the nation’s economic woes.

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