WASHINGTON (Reuters) - The U.S. Senate on Wednesday approved an amendment to a sweeping Wall Street reform bill that would preserve the Federal Reserve's supervision of thousands of smaller banks, reversing an earlier plan.
The 90-to-9 vote was a victory for the U.S. central bank and a setback for Senator Christopher Dodd, the Democratic chairman of the Senate Banking Committee, in his bold effort to rationalize the patchwork U.S. bank supervision system.
Under the overall reform bill as drafted by Dodd, the Fed would have retained oversight of large bank holding companies with assets over $50 billion, but given up authority over many state banks with assets under that figure.
That proposal was scrapped by an amendment offered by Republican Senator Kay Bailey Hutchison and Democratic Senator Amy Klobuchar. Their measure would preserve the Fed's power over small state-chartered banks in the Fed system, instead of moving them to the Federal Deposit Insurance Corp.
Dodd late last year had proposed creating a single super-cop for the banking industry, a move that would have consolidated duties now scattered across a number of federal agencies.
Under pressure from turf-defending regulators and banking lobbyists trying to preserve the status quo, Dodd was forced to retreat from his plan. The vote on the Senate floor on Wednesday further eroded Dodd's ambitious proposal.
(Reporting by Kevin Drawbaugh, Editing by Chizu Nomiyama)
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