The Strange Shape of Senate Financial Reform

Today Senator Chris Dodd unveiled a plan for the Senate version of financial regulatory reform.

The big news is the changes in the power of the Federal Reserve and the FDIC.  The Fed would be restricted in its ability to make loans to financial institutions, which of late has become a major part of its activity.  It also takes away much of the Fed's role in regulating banks.

Dodd is up for re-election in 2010, but he's not running against Ron Paul, so this new found hatred for the Fed seems a bit out of character.

Then there's this:

Mr. Dodd also stepped into a debate about the governance of 12 regional Fed banks. These banks play a role in regulating private banks and have a say in the Fed's decisions on interest rates. Private bankers choose six of the nine directors on the boards of each of these 12 regional Fed banks, which critics say could be a conflict of interest.

The personification of this concern over banks choosing Fed directors is none other than Obama Treasury Secretary Timothy Geithner.  One of the major knocks on Geithner has been his cozy relationship with many of the giant, now failed, financial firms during his time as head of the New York Fed, but as far as I know Dodd has never called on Geithner to step down.

So by Dodd's logic the process of banks choosing Fed directors is so flawed that the Senate and the President need to take over that duty, but overseeing a global financial crisis while at the New York Fed makes you qualified to be Secretary of the Treasury?

With a Senate counterpart like Dodd, Barney Frank has to like his chances to stay in the lead on financial reform regardless of how many times he is present at a pot bust.