Chistopher Dodd, Key Senator, to Unveil Regulatory Reform Plan

Nov. 6, 2009 -- In the wake of the worst financial crisis in generations, the battle over how to reform the system to prevent future meltdowns has fueled numerous proposals. Now, a key Senate lawmaker is set to unveil a plan that would represent a dramatic makeover of Washington's oversight structure.

Next week Senate Banking Committee chairman Chris Dodd, D-Conn., is due to unveil draft legislation that would break from other prior proposals put forth by the Obama administration and House Financial Services Committee chief Barney Frank, D-Mass.

Under Dodd's bill, the Federal Reserve and the Federal Deposit Insurance Corporation would lose many of their bank supervisory powers, a source in the financial industry told ABC News. In their place, a single bank regulator would be charged with monitoring all banks and bank holding companies, closing loopholes that allowed banks to shop around for their preferred regulator.

While the FDIC would continue to insure bank deposits and handle bank failures, the Fed would come out looking like a much different agency, without many of its bank supervisory powers and the power to make and enforce consumer protection rules, the source said.

In recent months Dodd has been openly critical of the central bank's performance in the run-up to the current crisis.

At a July 22 hearing, Dodd bluntly told Fed chief Ben Bernanke, "There is a history at the Fed that is deeply troubling to me."

The Connecticut lawmaker's upcoming proposal would differ from Frank's measure in a number of ways. There are four agencies that regulate banks, and while Dodd would them all into one, Frank would only get rid of the Office of Thrift Supervision. Dodd also wants to strip the Federal Reserve of some of its powers, but Frank wants to increase the Fed's bank regulatory work and give it new responsibilities over the country's biggest financial firms.

Even though Dodd's proposal will not be as close to the administration's proposal as Frank's plan was, the Obama administration appears comfortable with both of the Dodd and Frank plans. An administration official told ABC News that they are open to Dodd's plan, including the consolidated regulation, and remain optimistic about the contents of the ultimate bill.