Dodd has been a fierce critic of the Fed and had proposed last fall to strip it of its consumer and bank regulatory authority. But in his latest draft, the Fed fared much better than analysts had predicted a few months ago.
"Their track record is unbelievably horrible and particularly horrible on consumers," said Bill Black, a law professor at the University of Missouri-Kansas City and former regulator who cracked down on banks during the savings and loan crisis in the 1980s. "It's an extraordinary thing that they serve so inadequately."
The Fed would retain much of its banking oversight and would house the new consumer bureau.
Robert Shapiro, an economic advisor to former President Clinton and chairman of consulting firm Sonecon Inc., said that Fed Chairman Ben S. Bernanke won the support of the White House in part because "there's been a greater appreciation of the central role that the Fed played in pulling us from the precipice" of economic collapse.
In addition, he said, there appeared to be no better alternative.
The Fed also averted the worst of the effort by lawmakers to subject the central bank to greater congressional scrutiny.
The House version of the financial overhaul included a provision that could lead to auditing the Fed's monetary policy decisions.
Dodd's bill gives the Government Accountability Office authority to audit the Fed's emergency lending programs, which were used during the financial crisis.
Dodd also proposed some changes to the way the Fed is governed.
The head of the New York Fed would no longer be chosen by the bank's directors, but instead would be appointed by the president with approval of the Senate. Banks or other companies supervised by the Fed also would lose the power to vote for directors of all 12 Federal Reserve banks.
jim.puzzanghera@
latimes.com
don.lee@latimes.com
