The Federal Reserve would gain new powers over non-bank financial firms and keep much of its authority over banks under a new bill to be unveiled on Monday by the US Senate's architect of financial reform. In a turnaround for the central bank after months of public criticism, Senate Banking Committee Chairman Christopher Dodd was poised to release a bill that leans heavily on the Fed to fix the US financial system, sources said on Sunday. Not only would a new government watchdog for financial consumers be housed within the Fed, it would also retain much of its present authority over large bank holding companies and gain new authority over selected non-bank financial firms. Sources said the Fed would also continue supervising smaller, state-chartered banks now in the Fed system – a change from an earlier proposal that would have transferred those banks to Federal Deposit Insurance Corp. supervision. The plans could yet change, sources said, with weeks to go before Congress completes its long debate on regulatory reform after the worst US financial crisis in generations tipped the economy into recession and shook markets worldwide. With Republicans and bank lobbyists working to weaken and block new rules, the push for reform could fail in the Senate. That would hurt Democrats and President Barack Obama as they head into November elections already short on achievements. But the release on Monday of Dodd's bill will move the Senate closer to a decisive vote. In an interview, Dodd, a Democrat, told Reuters he would present his bill at a news conference scheduled for 1800 GMT and he threw down a challenge to Republican committee colleagues who wrote him a letter on Friday seeking more time to study the issue. He called their demands “terribly naive.” After months of debate, Dodd told Reuters, the road to financial reform is still difficult, but navigable. “If you want to work with me ... we can do it. If you don't, you can walk away or delay or say we shouldn't be meeting. But if you're interested in getting a bill, the door's open,” Dodd said.
