U.S. Senate expected to introduce alternative regulatory reform bill

The U.S. Senate is close to producing its own draft legislation on financial regulation. However, the legislation complicates President Obama’s current pending legislation and may eliminate chances for passing a bipartisan law this year.

“I’m afraid we’re moving towards a partisan process,” Senator Bob Corker, R-Tenn., said in an interview with the Financial Times.

The Senate’s bill also addresses provisions included in the Obama legislation, such as derivatives, systemic risk, resolution authority for failing companies and consumer protection.

The Senate’s bill suggests a consolidation of the four banking regulators, removing powers from the Federal Reserve and creating a single prudential supervisory body. In systemic risk regulation, the central bank would also lose power to a new council of regulators, rather than empower the Fed with the new authority.

The U.S. House of Representatives Financial Services Committee voted recently to approve H.R. 3126, legislation sponsored by Barney Frank, D-Mass. H.R. 3126 has stirred up significant debate, with particular controversy surrounding the creation of the Consumer Financial Protection Agency.

Part of Obama’s overhaul of the nation’s financial regulatory system, the new agency would consolidate the enforcement of federal financial consumer protection laws and could encompass financial services and products CPAs provide to individuals.  In response to testimony by AICPA and outreach by OSCPA, the Committee voted to exempt all usual and customary CPA services, as well as those that are “incidental” to usual and customary services.

The House continues to face strong opposition from many businesses and professions that remain affected by the reform package. The legislation will next go to the House floor for a vote. Frank is hoping for a December vote in the House.  With the introduction of the Senate’s bill, chances of a major regulatory reform legislation being passed before year-end are decreasing.

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