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Banking and Finance

Senator Dodd Releases Financial Regulatory Reform Legislation: The Home Stretch?


On Monday, March 15, 2010, Senate Banking Committee Chairman Chris Dodd (D-CT) released a Chairman's Mark of the "Restoring American Financial Stability Act of 2010" (the "Bill"). The Bill, which has been in development for months, is intended to replace the Discussion Draft previously circulated by Chairman Dodd on November 10, 2009 ("Discussion Draft") and is different in many respects from H.R. 4173, the "Wall Street Reform and Consumer Protection Act of 2009," which was passed by the House on December 12, 2009 (please see the Emerging Issues Analysis: Senator Dodd Releases Financial Reform Proposal: The Restoring American Financial Stability Act of 2009 and House Passes Financial Regulatory Reform Legislation for additional information). The Senate Banking Committee is scheduled to begin marking up the legislation on March 22.

Depository Institutions & Their Holding Companies

The Bill would shuffle the responsibilities of the Federal banking regulators and abolish the Office of Thrift Supervision ("OTS"), leaving the Office of the Comptroller of the Currency ("OCC") to oversee national banks, Federal thrifts, and holding companies of such depository institutions.

Supervision of state banks that are members of the Federal Reserve System would be transferred from the Board of Governors of the Federal Reserve System ("Federal Reserve") to the Federal Deposit Insurance Corporation ("FDIC"). The FDIC would continue to supervise Federally-insured state banks and thrifts. The FDIC would also supervise depository institution holding companies that have more state-insured deposits than Federally-insured deposits and have total assets of less than $50 billion. The Federal Reserve would have rulemaking authority over depository institution holding companies of all sizes, but it would only directly supervise holding companies with consolidated assets of over $50 billion.

Contrary to H.R. 4173, the Federal thrift charter would be abolished, with a grandfather provision for existing thrifts. The Bill would prevent a commercial firm from acquiring control of an FDIC-insured credit card bank, industrial loan company, or trust company during a three-year moratorium. During the moratorium, a study would be conducted to evaluate the consequences of subjecting a broader range of companies to the restrictions of the Bank Holding Company Act.

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