Top 8 Provisions of the Senate's Financial Reform Bill

As Christopher Dodd, chairman of the Senate Committee on Banking, Housing and Urban Affairs, tries to get his colleagues to pass his financial reform bill as soon as he can (possibly this week), we bring you the major provisions of the 1,139-page legislation.

1. The creation of a Consumer Financial Protection Agency: This independent watchdog would "ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, while prohibiting hidden fees, abusive terms, and deceptive practices." This agency would have authority to investigate and react to abuses. It would focus its resources on companies that are considered to pose the biggest risk to consumers - mortgage bankers, brokers, finance companies and the largest institutions.

2. The end of too big to fail policies: The bill seeks to prevent large and complex financial companies from bringing down the economy by creating a safe way to shut them down if they fail; imposing new capital and leverage requirements and requiring they write their own "funeral plans" [formerly referred to as "living wills"]; requiring industry to provide their own capital injections; updating the Fed's lender of last resort authority to allow system-wide support but not prop up individual institutions; and establishing standards and supervision to protect the economy and consumers, investors and businesses.

3. The creation of an agency to oversee systemic risks: This independent agency would have a board of regulators to identify and address systemic risks posed by large, complex companies, products, and activities "before they threaten the stability of the financial system." If the agency determined that a company threatens the economy, it could require that company to divest some holdings.

4. The establishment of one federal bank regulator to oversee all banks: One "Financial Institutions Regulatory Administration" would combine the functions of the Office of the Comptroller of the Currency and the Office of Thrift Supervision, the state bank supervisory functions of the Federal Deposit Insurance Corporation and the Federal Reserve, and the bank holding company supervision authority from the Federal Reserve. The FDIC and the Federal Reserve would continue to exist, but the FDIC would focus on insuring deposits and resolving failed institutions, retaining backup examination authority over troubled banks and gaining additional authority to accompany the new agency on examinations of healthy banks and holding companies, to gather background information for insurance decisions. The Federal Reserve would focus on monetary policy "without being distracted by responsibilities for bank oversight and consumer protections."

5. Shareholder say on executive pay: This provision would provide shareholders with a say on pay and corporate affairs with a non-binding vote on executive compensation and director nominations.

6. An attempt to close regulatory loopholes: This part of the bill addresses over-the-counter derivatives, hedge funds, and brokers of mortgage-backed securities. Derivatives reform included in the bill would provide the SEC and CFTC with authority to regulate over-the-counter derivatives. It would require central clearing and exchange trading for some types of derivatives contracts [to be determined by regulators]. For un-cleared trades, traders would have to post margin and capital. It would also require data collection and publication through clearing houses or swap repositories to improve market transparency. Hedge funds worth over $100 million would be required to register with the SEC as investment advisers and to disclose financial data. Companies that sell mortgage-backed securities would be required to retain at least 10% of the credit risk. They would also have to disclose more information about the underlying assets and analyze the quality of the underlying assets.

7. A new Office of Credit Rating Agencies at the Securities and Exchange Commission: The goal would be to strengthen regulation of credit rating agencies, setting new rules for internal controls, independence, transparency and penalties for poor performance.

8. Protections for investors: One change proposed under this umbrella is SEC reform that would include an annual assessment of the SEC's internal supervisory controls and a biannual GAO study of SEC management. Another is uniform standards for anyone providing customers investment advice - brokers would be held to the same fiduciary standard as investment advisers. Investors would be able to sue persons who help commit securities fraud. An Investment Advisory Committee made up of investors would advise the SEC on its regulatory priorities and practices.