The Good the Bad and the Ugly in the Dodd Bill

Here are some highlights regarding the 1,300 page bank reform bill released by U.S. Senator Chris Dodd (D-CN) yesterday.


  1. Capital requirements and leveraging requirements to be set by regulators (although some reformers would like these set in law to makes sure they do the job).
  2. Creates a council of systemic risk regulators called a Financial Stability Oversight Council, which is generally a good idea. We don't want to just leave it to the Federal Reserve.
  3. Obama's "Volcker Rule" included, not perfect, but at least it made the cut.
  4. Consumer Financial Protection Agency (CFPA) remains a strong institution with rulemaking and enforcement authority over banks and nonbanks.
  5. No new preemption of state attorneys general.
  6. Credit rating agencies, which gave AAA ratings for toxic mortgage-related securities, can be sued for damages if they don't do their job.
  7. Good reforms of the Federal Reserve system, including: NY Fed President will be appointed; no bank selection of directors; no bank personnel as directors; and a annual Fed audit.


  1. No break up of the too big to fail banks, no prevention of too big to fail, just a costly process for unwinding the firms once they do fail and a $50 billion industry fund to pay for such a collapse.
  2. No caps on how large a bank can grow. The size limitation that was included as part of the Volcker rule just says that companies cannot merge to become greater than 10 percent of all liabilities in the system. This enshrines the too big to fail institutions that do exist and does not place a limit on the size that they can achieve organically.
  3. Continuing derivatives loopholes for foreign exchange traded derivatives and there appears to be a problem with the lack of regulation for non-clearing house participants.
  4. No real reform of credit rating agencies, such as by creating public or private competition for these failed institutions.
  5. The Consumer Financial Protection Agency (CFPA) will be housed at the Federal Reserve -- a move to appease Republicans that will undermine its legitimacy with the public. CFPA will not have authority over all banks, just the largest banks, a bad idea sure to encourage risky behavior on the part of smaller banks. CFPA authority over "large" payday lenders (exempting how many?). Systemic risk regulators of the Financial Stability Oversight Council can override CFPA rules with a 2/3 majority vote and just one regulator could delay CFPA rules. These are bizarre provisions, isn't it time to give consumer representatives a veto over banking regulators and not visa versa?


Usually a draft like this sets the high water mark. With 1,500 bank lobbyists on the hill and $390 billion spent on finance industry lobbying in 2009, the public will need to weigh in to fix the problems that do exist in the bill and hold off provisions that will make the bill worse. Get involved! Send an email to your legislators at

Mary Bottari

Mary Bottari is a reporter for the Center for Media and Democracy (CMD). She helped launch CMD's award-winning ALEC Exposed investigation and is a two-time recipient of the Sidney Prize for public interest journalism from the Sidney Hillman Foundation.


Ever hear of the 10th Amendment - The one in our constitution that protects States' Rights. You see, unlike banks and credit unions, payday lenders are already transparent in their transactions and heavily regulated in 34 states. Of course, the purpose of the proposed CFPA was supposed to be to protect the nation and all of its citizens from the forces that have cost millions their homes, tens of millions - their jobs and almost all of us, part of our savings and investments in the future. Yet, you would rather target payday loans, used by 19 million Americans annually and with a consumer satisfaction rate in the 90s...And, an industry that hasn't been offered or taken any government handouts. The arguments are made that short-term loans can be made at 36% APR to those with at-risk credit...yet no one has found a model that works without significant subsidies. That's right....the Military, state employees in Pennsylvania, etc.... Those programs are taxpayer subsidized. Goodwill, a non-profit charity tried to offer a $9.99 per $100, one month loan, by the way, that's 120% APR, and couldn't make it work. Some banks are succeeding at this model, because they offer this product through their ATM machines at no additional costs and require direct deposit, so they avoid any risk of loan default. That's convenient! Of course, when your account is automatically debited, you may get hit with the overdraft protection "loan" you were attempting to avoid in the first place! How about those golden children credit unions.... Sure, they offer flex-payment credit lines, but guess what they charge for overdraft protection "loans?" Wait...they don't call them loans, so they don't have to comply with the same rules payday lenders do.... Payday loans are continually vilified by the media when they are 1/5 the cost of bank and credit union alternatives! That's right...1/5th. The average payday loan has a fee of about $15 per $100 borrowed for two weeks. That's $0.15 per $1.00 borrowed. By contrast, the average bank and credit union overdraft protection "LOAN" (FDIC research) has a fee of $27 + per $36 borrowed for 3 or 4 days. That's $0.75 per $1.00 borrowed. In some cases, banks charge up to $40 per overdraft check and after 4 days, charge an additional $8 per day. In this case, the fees on a $100, two-week "overdraft protection LOAN" from a bank equal $128. That's $1.28 per $1.00 borrowed. It is critical that the community has a voice in public debate, but make sure it is the CUSTOMER'S, not the "self-proclaimed consumer advocates" and media, often funded by banks and credit union, who are being heard! Link to voices of actual payday customers!

I agree with jkursman ... payday lending is highly regulated at the state level. Regulations include, among other things, capping the amount customers can borrow and the fees lenders can charge. States also generally either prohibit loans from being “rolled over” (i.e., extended with another fee being charged) or limit such rollovers to one or two times. Instead of over regulating payday loans and limiting consumer options, a better solution is to keep freedom of choice for consumers. In a state-regulated environment, payday advances can often be the best choice for consumers.

I'm currently studying the effects of good and bad moves in American government and I'm hoping to see the effects of this bill, whether good or bad. Obviously every bill has some positive and some negative points, but the proof is in the pudding where it will take time to see the after effects.

The 13th Tribe is at it again. Cause the "crisis" and get Congress to pass "reforms" that will eventually lead to the death of all small community banks. This is precisely how the jews got the Federal Reserve Act passed. Thank you

To "the banking crisis has long past, you all discuss it." Well that removes all doubt for me! It probably won't do any good but what are you talking about? It must be nice to wander about soaking in the universe then making profound observations about things you apparently don't understand. Maybe you meant "has long passed" but even if you had a rudimentary grasp of grammar your knowledge of banking and history relegates you to the "listen and you might learn something" category.

Still not sure about Chris Dodd and this sweeping financial reform legislation. I can't believe there will be no cap on banks-just what we need another monopoly crisis. We are already seeing it with television. Caps are created in order to support the little man, let us not forget about him.

Finally, regulators are back in control. Things we're bound and destined to get out of control so long as this wasn't the case!

Surely, this is a little too late, the horse has already bolted from the stable. Low interest rates are also penalising the savers.

We need more lobbyists ... end of story. <a href="">:</a> )