Dodd’s Decision to Snub Republicans Could Stall Financial Bill

March 12 (Bloomberg) -- The most ambitious attempt to overhaul U.S. financial rules since the 1930s suffered a setback as the third bipartisan push collapsed, setting the stage for wrangling that could delay a final bill for months.

Senate Banking Committee Chairman Christopher Dodd, whose talks with Republican Bob Corker of Tennessee ended yesterday, now plans to introduce his own bill March 15. A lack of bipartisan backing may diminish the bill’s chances in a Senate where Republicans are needed to advance legislation.

“We were already becoming increasingly pessimistic about the chances of a bill,” said Brian Gardner, an analyst at New York-based Keefe Bruyette & Woods Inc. Dodd’s announcement “just bolsters our view.”

Two years after the worst financial crisis since the Great Depression, Congress has yet to approve rules to avoid a future collapse. President Barack Obama asked Congress in June for legislation to protect consumers from abusive mortgage lending practices, tighten oversight of derivatives trading and detect practices that could pose a risk to the financial system.

The House passed legislation in December, adopting many Obama proposals. Dodd said yesterday he ended talks because time is running out to complete work in the Senate as lawmakers focus on re-election campaigns. Dodd said some proposals offered by Republicans will be in his bill.

Dodd’s plan “puts final passage of a comprehensive financial reform bill very much in doubt before the election,” Camden Fine, president of the Independent Community Bankers of America, a Washington-based trade group, said yesterday in an e- mail. “A strong financial reform bill is possible this year, but the odds are not as good as they were.”

Republican Unity

Senator Richard Shelby of Alabama, the top Republican on the committee who broke off talks with Dodd in February over consumer protections, said Dodd’s chances for success depend on Republican support.

“If Senator Dodd is looking for critical mass to put a bipartisan bill together, we’re willing to meet him at least halfway,” Shelby said yesterday in an interview. “I don’t believe they can push a bill through the Senate if Republicans stay together.”

Shelby, Treasury Secretary Timothy Geithner and banking committee Republicans discussed the legislation yesterday. Shelby said he told Geithner he wanted to create a consumer office at the Federal Reserve with the power to write rules. Shelby said bank agencies should review those rules and sign off before they talked effect, Shelby said.

Obama’s proposal for the Consumer Financial Protection Agency to police banks for lending abuses has been the biggest sticking point in Senate talks. Dodd recently backed away from Obama’s plan and embraced creating a consumer division at the Fed, provided the unit had autonomy.

To contact the reporters on this story: Alison Vekshin in Washington at avekshin@bloomberg.net. Phil Mattingly in Washington at pmattingly@bloomberg.net.