Senate Banking Committee Chairman Christopher Dodd on Tuesday called for sweeping new government powers to prevent another economic collapse, protect consumers and dismantle failing institutions.Dodd's 1,100 page-draft would strip the Federal Reserve and other regulators of their powers to regulate banks and hand that job to a single agency. The bill also would take away the Fed's ability to monitor credit cards and mortgages and establish a new "Consumer Financial Protection Agency."
The bill, inspired by last year's financial meltdown, will minimize "economic turmoil and protect(ing) the interest of taxpayers," the Connecticut Democrat wrote.
An advance copy of the legislation was obtained by The Associated Press.
President Barack Obama has demanded that Congress rewrite the federal regulations governing Wall Street to close legal loopholes and prevent the kind of fraud and abuse that fed the crisis.
Dodd's proposal was expected to gain broad support among Democrats, but Republicans haven't signed on.
Among the top points of contention is Dodd's desire to create a new agency to protect consumers taking out home loans or using credit cards against predatory lending and surprise interest rate hikes.
Republicans counter that creating another bureaucracy will make business harder for banks and limit the availability of credit.
The Senate Banking Committee was expected to review the legislation next week, paving the way for a floor vote by early next year.
The House was already on track with its own proposal. Rep. Barney Frank, chairman of the House Financial Services Committee, said he expects a floor vote in December.
Dodd's plan differs slightly from Frank's bill and the 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.
For example, Frank has proposed that the Fed be in charge of enforcing tougher regulations on large and influential financial firms so that they don't grow "too big to fail." A council of regulators would monitor these firms and make recommendations.
Under Dodd's bill, the Fed would have less reach. An "agency for financial stability," managed by a board that includes Fed representation would enforce new rules and dismantle complex financial firms if they threaten the broader economy.
Both the House and Senate bills would likely put limits on the Fed's ability to provide emergency loans and eliminate its oversight of consumer protections.
Also unlike the House bill, Dodd's proposal would establish a single federal regulator for banks called the "Financial Institutions Regulatory Administration."