Senate Banking Committee Introduces The Restoring American Financial Stability Act

In a continuing effort by Congress to address the perceived causes of the recent financial crisis, on November 10, 2009, the Senate Committee on Banking, Housing, and Urban Affairs, through its Chairman, Senator Christopher Dodd (D-Conn.), introduced the Restoring American Financial Stability Act in the U.S. Senate.

Mr. Dodd's proposed legislation would cover three principal subjects. First, the proposed legislation, which remains in its draft stages, proposes financial regulatory reform initiatives similar to those outlined in a piece of legislation introduced in the U.S. House of Representatives in October 2009, entitled the Financial Stability Improvement Act. Second, the proposed legislation contains provisions that would mandate certain changes in the areas of executive compensation that would be applicable to public companies. Third, the legislation would impact corporate governance at public companies. As to the latter two topics, Mr. Dodd's proposed legislation adds to the growing list of similar reform legislation currently pending in Congress (including the Shareholder Bill of Rights introduced in May 2009 by Sens. Charles Schumer (D-N.Y.) and Maria Cantwell (D-Wash.); the Shareholder Empowerment Act of 2009, introduced in June 2009 by Rep. Gary Peters (D-Mich.); and the Corporate and Financial Institution Compensation Fairness Act of 2009, introduced in July 2009 by Rep. Barney Frank (D-Mass.).

Mr. Dodd's proposed legislation would substantially overhaul the existing U.S. financial regulatory system by creating more streamlined regulatory oversight and provide additional measures intended to protect American consumers. In particular, the proposed legislation would:

Create the Consumer Financial Protection Agency, an independent regulatory body with the responsibility to monitor consumer financial products. The agency would consolidate the consumer protection responsibilities of several federal agencies, including the Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation, the Federal Reserve, the National Credit Union Administration, and the Federal Trade Commission.

Create the Agency for Financial Stability, an independent agency tasked with identifying risks posed to the economy by the complex products and activities of large financial institutions and other companies. Among other things, the proposed legislation would give this new agency the authority to require a...