Dodd/Shelby Financial Reform Amendment Passes

http://www.latimes.com/media/photo/2010-02/52064173.jpg

An amendment offered by Banking Committee Chairman Chris Dodd (D-CT) and Ranking Member Richard Shelby (R-AL) to the Restoring American Financial Stability Act (S. 3217) has been adopted by a vote of 93 to 5.

Congressional Quarterly on some of the key provisions:

The agreement abandons a $50 billion resolution fund that would have covered the costs of a major financial collapse. Instead, if the amendment is adopted, as expected, the Federal Deposit Insurance Corporation would have the ability to liquidate large firms, and could likely use a credit line from the Treasury Department to cover any costs. Any losses the FDIC encounters would be recovered as the agency sells off the assets of the failed firm.

Creditors of a failed firm would be required to pay back any money they received during a financial failure that is in excess of what they would have been awarded through traditional bankruptcy proceedings.

The agreement also would clamp down on the authority of regulators to assist the financial industry. Congressional approval would be required before the government could guarantee the debt of a financial firm, as the FDIC did during the recent financial crisis.

The Federal Reserve, meanwhile, could only use its emergency lending powers to assist solvent companies.

(credit image – la times)

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