Corrupt Senate to water down banking regulatory reform; corrupt Fed will continue "oversight" of banks preying upon US consumers, economy

Critics hit U.S. Senate tilt toward Fed status quo

WASHINGTON, March 8 (Reuters) - U.S. senators leaning toward preserving the Federal Reserve's role as a bank supervisor and consumer protection regulator came under criticism on Monday from academics and consumer activists.

"Allowing the Fed to retain policing authority over the country's 23 largest banks ... and including responsibility for a new consumer protection agency is a bad idea," said Mark Williams, a lecturer at Boston University's management school.

"Irresponsible Fed actions supplied gasoline that ignited the financial crisis," he said. "Instead of rewarding the Fed for a job poorly done, Washington policy-makers should not reward unacceptable regulatory behavior."

The Fed could retain oversight of large bank holding companies under a scaled-back regulatory reform plan being considered in the Senate Banking Committee, lobbyists said.

In a retreat from a bold proposal to streamline a patchwork bank regulatory system, lawmakers were considering keeping supervision of companies such as Citigroup (C.N) and Bank of America (BAC.N) at the Fed, as Reuters reported in February...

In November, Dodd called the Fed's past performance as a banking supervisor and consumer protection watchdog an "abysmal failure." When he made that remark, he proposed consolidating bank supervision into a super-cop for the industry to be called the Financial Institutions Regulatory Administration, or FIRA.

But the FIRA proposal has unraveled as Dodd has discussed a range of compromises with Republicans and moved closer to embracing regulatory reforms watered down from a sweeping bill approved in December by the U.S. House of Representatives.

The FIRA would have streamlined the bank oversight duties of the Fed, the Comptroller of the Currency, the Federal Deposit Insurance Corp and other agencies.

Another potential Senate compromise is to put a proposed financial consumer watchdog office inside the Fed.

"We do not believe banking regulators, or any committee or group of those regulators, should be given any authority to veto or delay important consumer protections," said Pam Banks, senior counsel at Consumers Union, the non-profit publisher of Consumer Reports magazine.

"Inaction and delay by banking regulators is what allowed the subprime crisis to fester in the first place, threatening the near collapse of our economy," Banks said.

In recent weeks, the Fed has pushed hard to preserve its role as a bank supervisor...MORE...LINK