WASHINGTON -- The senator trying to rewrite U.S. financial industry rules is dropping plans to create a stand-alone consumer financial protection agency and to give a single regulator the power to oversee all banks, according to people familiar with the evolving proposal.
Backing away from the proposal he offered four months ago, Sen. Christopher Dodd, the chairman of the Senate Banking Committee, said the bill he intends to unveil Monday is an attempt at consensus that incorporates Democratic and Republican ideas, even though no Republicans have lent their support.
"There has been some evolution," Dodd said Sunday in an interview with The Associated Press. He voiced irritation with Republicans in his committee who demanded Friday that he delay committee action on the bill.
"Tell that to someone who just lost their job, their retirement, their health care and their home that we're moving too quickly," he said. "Tell that to the financial institutions that are looking for certainty."
In the coming weeks, Dodd's skills will be tested as much as they ever have in his five terms in the Senate as he shepherds the bill through his committee and onto the Senate floor. The legislation, a priority for President Barack Obama, aims to avoid a repeat of the financial crisis that caused the Wall Street meltdown 18 months ago.
Dodd, who's not running for re-election this fall, is planting himself squarely between a united bloc of Republicans on his committee and Democrats who have insisted on a strong, autonomous consumer agency. He's also facing Democratic pressure from outside his committee to take stronger measures to cut down the size of banks and to limit their activities.
"Members have to make up their minds," Dodd said. "While they may not like everything here, I'm not going to give them much room to say we shouldn't do anything."
In the interview, Dodd would not discuss specifics of his plan, but he acknowledged that his views on a single regulator had changed and that he also saw merit in not giving a consumer agency complete autonomy in writing regulations.
"There ought to be a means by which there is some reconciliation of potential conflict" between consumer protections and regulations regarding the safety and soundness of banks, he said.
Dodd's new regulatory scheme follows months of bipartisan negotiations -- most recently with Republican Sen. Bob Corker -- that abruptly ended last week when he said it was time for his committee to consider a bill.
"What he's going to offer tomorrow will be a vast improvement over where he was in December," Corker said Sunday. "But I'm sure he has moved the bill to the left of where we were Thursday in order to ensure that he has all the Democratic members with him."
Corker said he still believed that through amendments in committee, the bill could win bipartisan support.
Those familiar with the plan described it on condition of anonymity because they were not authorized to speak publicly. The details, they said, remained in flux.
Dodd wants to create a special council that would watch over the financial markets, looking for trouble spots that could threaten the economy. The council would have an independent chairman appointed by the president. Members would include the treasury secretary, the chairman of the Federal Reserve and the heads of several regulatory agencies.
The Fed, which would have lost all its regulatory powers under Dodd's initial plan, would emerge with fewer banks to supervise, but with new muscle over the biggest banking and nonbanking financial institutions in the country.
The central bank, faulted for not seeing the recent crisis, would oversee all bank holding companies with assets of more than $50 billion -- about 50 institutions in all. That's more than Dodd had considered as early as last week. Currently, the Fed supervises all bank holding companies. It would retain supervision of hundreds of state-charted banks and the U.S. branches of foreign banks.
And it would oversee nonbanks that the risk council determines are so large and interconnected that their failure would threaten the financial system.
Dodd's other significant shift is on consumer protections, after initially adopting Obama's plan for a separate agency. Dodd has now moved closer to a plan he was negotiating with Corker.
The new bill would create a division within the Fed that would have the power to write regulations governing a range of consumer financial transactions, from mortgages to payday loans to credit cards. Those rules could be vetoed by a two-thirds vote of the council. The consumer agency would not have enforcement powers; other regulators would police the various parts of the financial industry.
Dodd said the measure would make sure consumers "never once again face a problem where there's no one down here keeping an eye out for their interests."
But John Taylor, head of the National Community Reinvestment Coalition, a consumer advocacy group, said Dodd was "capitulating to the industry's interests."
"He's offering a faux consumer protection agency that holds little promise to be effective in the long run," Taylor said.
Unlike Corker's plan, though, Dodd would let states write and enforce their own tougher consumer rules. Dodd's bill would incorporate language similar to the House bill, which would allow those state rules to be challenged in court if they "materially interfere" with the business of banking. Bankers have lobbied heavily against the right of states to write their own laws, fearing a patchwork of regulations.