Sen. Christopher J. Dodd told reporters: "Let me be clear: We are still… (Mark Wilson / Getty Images )
Reporting from Washington — With memories of the financial crisis already fading, Senate Banking Committee Chairman Christopher J. Dodd tried to jump-start the stalled effort to pass a major regulatory overhaul this year that would protect the public from another economic meltdown.
Dodd's latest version of the legislation, unveiled Monday, is more modest than the ambitious ideas President Obama called for a year ago, but it still would be the most sweeping financial reforms since the Great Depression.
With the Connecticut Democrat unable to secure any Republican support after weeks of intense negotiations -- and with the legislative clock winding down -- he warned that senators needed to act soon to prevent a financial fiasco from again severely shaking U.S. and world markets.
"Let me be clear: We are still vulnerable to another crisis," Dodd told reporters. "It is certainly time to act."
But his biggest problem has been to figure out exactly how to act on such a complex issue to ensure the legislation gains enough Republican votes to get through the bitterly divided Senate.
In releasing his 1,336-page bill, Dodd was forced to abandon some of the more aggressive ideas he proposed in the fall in legislation that had tracked Obama's proposal. Among them was creation of a stand-alone Consumer Financial Protection Agency.
But after breaking off talks with Republicans last week and deciding to forge ahead on his own, Dodd also toughened some aspects of the legislation from a compromise proposal he had floated to try to earn GOP support. For example, Dodd's plan added additional autonomy to a new agency to protect consumers in the financial marketplace.
Dodd needs to thread a narrow needle, incorporating ideas from Republicans to gain a few of their votes while not losing support from Democrats who want a tougher crackdown on financial institutions.
"It does not, as of yet, of course, enjoy bipartisan support," Dodd said of his legislation. "But we do need to act."
The bill would give the government broad new powers to monitor the economy for signs of risk and to seize and dismantle companies whose imminent failures could threaten another crisis. It also would add oversight of hedge funds and derivatives markets, the complex securities that helped fuel the meltdown, and plug holes in the regulatory system that allowed financial institutions to take on excessive risk.
Obama said the proposal, though it deviates from his plan and the one passed by the House in December, "provides a strong foundation to build a safer financial system."
Treasury Secretary Timothy F. Geithner said the administration would work with Dodd to strengthen the bill and beat back attempts to weaken it.
But Dodd's attempts to find common ground, particularly on the controversial issue of a consumer protection agency, met with criticism from some Republicans and consumer groups.
Sen. Richard Shelby (R-Ala.), the banking committee's top Republican, said he and his colleagues needed time to analyze the bill and said Dodd's plan to have the panel vote on it next week was "unrealistic."
Sen. Bob Corker (R-Tenn.), who had negotiated with Dodd on a bipartisan bill until last week, said he would work to amend the bill. The latest proposal "has a number of policies I cannot support," Corker said.
A major flash point is consumer protection.
Dodd proposed a new consumer protection bureau, with a director appointed by the president and confirmed by the Senate. The agency would be an independent entity in the Federal Reserve with a separate budget but not reporting to the Fed. An agency decision could be vetoed by a two-thirds vote of a new council of financial regulators.
The Fed, which has authority to write consumer protection rules for the financial industry, has been sharply criticized for not doing more to stop subprime mortgages before they triggered the collapse of the housing market. Dodd has been among the sharpest critics but said the agency would not be beholden to the Fed.
Republicans strongly oppose a stand-alone consumer agency, as does the financial industry and the U.S. Chamber of Commerce. They argue that decisions about financial products should be made in close conjunction with banking regulators, who would consider the effect on the financial health of the institutions.
That opposition was the reason he abandoned plans for such an agency, Dodd said. But his proposal drew criticism. The Financial Services Roundtable, which represents large financial institutions, said it would give the new bureau too much autonomy.
The U.S. Chamber of Commerce, which has led the charge against a consumer agency, called Dodd's proposal "an unfortunate step backward."
And on the other side, Consumers Union said it had problems with Dodd's plan to allow the council of regulators to veto the consumer board's decisions.
