Senator Dodd's financial reform bill, in summary

Here's a brief summary of the financial reform bill proposed by Senator Dodd:

• Consumers: A consumer-protection division would be created within the Federal Reserve, with the ability to write new rules governing the way companies offer financial products such as mortgages and credit cards. It would have authority over any bank with more than $10 billion of assets, and certain nonbank lenders.
• Banks: The Fed would oversee bank holding companies with more than $50 billion of assets. Regulators would have the discretion to force banks to reduce their risk or halt certain speculative trading practices.
• Failing companies: The government would be able to seize and break up large failing financial companies. Big companies would have to pay into a $50 billion fund to finance the dissolution of a failing firm.
• Systemic risk: A new council of regulators would be created to monitor broader risks to the economy. The council could strongly urge individual agencies to take specific actions to curb risk.
• Corporate governance: The Securities and Exchange Commission would have authority to write rules giving proxy access to shareholders who own a certain amount of stock. Shareholders would have a nonbinding vote on compensation packages for top executives.
• Hedge funds: Large funds would have to register with the government.

On the surface I don't think it's bad. I don't know much about the details.

I really like the consumer protection part, because a lot of credit card and consumer lending has gotten completely out of control. Will the new regulation result in 20% down payments for houses again? I doubt it. Why would the new regulation result in 20% down payments when the government, via the FHA, is encouraging 3.5% down payments?

I think having a systemic risk regulator is a good idea. I am skeptical about its ability to prevent future financial crises, though. After all, didn't the Fed completely look the other way during the buildup of the housing bubble? When everybody's getting rich, nobody wants to step in and stop the party. I don't see how this changes that innate human tendency.