Today, as the Senate continued floor debate on financial reform legislation, Senate Banking Committee Chairman Christopher Dodd (D-CT) announced that he had reached an agreement with Ranking Member Richard Shelby (R-AL) on "provisions for orderly liquidation and emergency liquidity programs in the bill to bring accountability to Wall Street." Senator Shelby also issued a statement describing the compromise. Key points of agreement highlighted in the two Senators' announcements are the following:

  • Deletion of the proposed $50 billion resolution fund, which had drawn considerable Republican criticism (and which, as Senator Dodd noted, was not included in his original draft legislation);
  • Provision for creditors "to pay back the government any amounts they received above what they would have gotten in liquidation"; creditors "who directly benefited from the orderly liquidation will be the first to pay back the government at a premium rate”;
  • Congressional approval requirements for "the use of debt guarantees” by the FDIC and Treasury;
  • Limiting the Federal Reserve's use of its 13(3) emergency lending authority, including "strict solvency and collateral requirements" and "strict accountability standards" for emergency lending and a new requirement that the Federal Reserve obtain the approval of the Treasury Secretary before undertaking any emergency lending; and
  • Enhanced authority of regulators to "ban culpable management and directors of failed firms from working in the financial sector.”