–Key Republican Senator: Consumer Entity Is Huge Overreach
–Sen. Shelby: ‘We’ve Got To Fix’ Derivatives Language
–Sen. Shelby: Reg Bill Should Include GSE Reforms
–Sen. Shelby: Sanders Amendment Would Not ‘Inhibit’ Fed’s Mon Policy

By John Shaw

WASHINGTON (MNI) – Sen. Richard Shelby, the ranking Republican on
the Senate Banking Committee, said Thursday he will lead an effort
to overhaul key provisions related to a new consumer protection entity
in the financial regulatory reform bill.

At a briefing, Shelby blasted provisions in the regulatory reform
bill pertaining to a new consumer financial protection bureau that were
drafted by Sen. Chris Dodd, the chairman of the Banking panel.

Shelby said Dodd’s proposal would create a “massive new
bureaucracy” that would have a “tremendous reach into Main Street
companies.”

The new entity, Shelby said, would represent an “incredible
expansion of the government’s reach.”

Shelby said he will offer a “more rational and constructive
alternative” to Dodd’s plan.

Shelby’s alternative would create a new consumer protection entity
that is based in the Federal Deposit Insurance Corporation. Current
banking regulators would retain their enforcement and supervisory
authority.

Shelby said that he expects the Senate to vote later in the day on
his amendment.

On other matters related to regulatory reform, Shelby said the
bill’s provisions on derivatives are unacceptable, arguing they are far
too restrictive.

“We’ve got to fix the derivatives” provisions, he said.

Several Republican senators are offering an amendment that would
strike provisions in the bill that prohibit banks from engaging in
derivatives transactions.

Shelby said that he has not yet decided if he will support an
amendment to provide for much broader auditing of the Federal Reserve
Board.

The author of the Fed amendment is Independent senator Bernie
Sanders.

Shelby said the Fed should “not be embarrassed” about having more
disclosure about its operations.

He said that he does not believe the Sanders amendment would
“inhibit” the Fed’s conduct of monetary policy–an assertion Fed
chairman Ben Bernanke has made about the amendment.

Shelby also said the bill should include a package of reforms to
the housing GSEs.

“GSEs were a big part of the financial debacle,” Shelby said.

The underlying Senate bill establishes a new independent Consumer
Protection Bureau at the Federal Reserve Board, creates a process to
liquidate failed financial firms, sets up a council of regulators to
oversee systemic risk in the economy, establishes a regulatory structure
for over-the-counter derivatives, requires hedge funds that manage over
$100 million to register with the SEC and creates a new office within
Treasury to monitor the insurance industry.

Dodd’s bill has been merged with a package that was approved by the
Senate Agriculture Committee which requires OTC markets to adopt aspects
of the regulated markets such as mandatory clearing through derivatives
clearing organizations and trading on exchanges or exchange-like
facilities.

It has a narrow exemption for commercial “end users” who use
derivatives to hedge against economic contingencies such as fluctuations
in fuel prices, currency and interest rates.

** Market News International Washington Bureau: (202) 371-2121 **

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