By Silla Brush - 07/22/09 06:54 PM EDT
The 101-page draft bill circulated late on Wednesday includes efforts to beef up the bankruptcy code to deal with failing firms, reform Fannie Mae and Freddie Mac and tighten oversight of the Federal Reserve. The bill will be unveiled on Thursday, according to an aide.
“At the core of our plan is a promise to the American taxpayer: no more bailouts," Garrett said in a statement. "It’s time to reject the 'too big to fail' logic that has resulted in unprecedented government intrusion into the marketplace and reinstate the free market principles that are the cornerstone of our nation and a healthy financial sector."
Congress is debating proposals made by the Obama administration to revamp the regulatory system by setting up a new federal regulatory agency on consumer financial products, empower the Federal Reserve with oversight of "systemic risk," establish new powers to deal with failing non-bank institutions and increase regulation of financial derivatives.
House Financial Services Committee Chairman Barney Frank (D-Mass.) had planned to mark up legislation establishing a Consumer Financial Protection Agency before the August recess. Frank put that on hold until September and said earlier on Wednesday that he welcomes a "national debate" on the issue amid strong lobbying from the financial industry and opposition from Republicans.
The Republican bill would establish a Market Stability and Capital Adequacy Board to report on systemic issues that would include all the major federal regulators. Obama intends to empower the Federal Reserve with specific responsibility while establishing an oversight council of regulators.
The bill would also set up a Financial Institutions Regulator with consolidated supervision responsibilities currently with the Federal Reserve, Office of Thrift Supervision and Office of the Comptroller of the Currency. Additionally, that regulator would have consumer protection responsibilities.
Republicans are in favor of having the Government Accountability Office audit the Federal Reserve, an idea on which the central bank has pushed back. The bill would also bar the Fed from targeting specific companies when it seeks to provide aid.
"No individual firm may be assisted by the Federal Reserve," according to a summary of the bill.
The bill would seek to change regulations of credit rating agencies. The bill does not mention financial derivatives, products used to hedge risk that many blame as a major factor setting off the crisis.