Dodd's super bank cop faces tough battle

By Karey Wutkowski

WASHINGTON (Reuters) - A U.S. Senate proposal to create a federal super cop to police banks faces formidable opposition from the industry, current regulators and a senior House lawmaker who recently blasted the idea.

Christopher Dodd, chairman of the Senate Banking Committee, unveiled on Tuesday his highly anticipated version of financial regulatory reform, which calls for consolidating all federal policing of banks in a new body called the Financial Institutions Regulatory Administration, or FIRA.

There has been little defense of the current system, which scatters responsibility among four banking regulators.

But a single federal regulator scares small banks who fear their interests will be secondary to those of financial giants, and irks current regulators who do not want to lose power.

Also, Representative Barney Frank, Dodd's reform architect counterpart in the House of Representatives, said late last month there was "no remote chance" of that much consolidation. The Obama administration also does not go as far as Dodd's proposal.

Dodd promoted the idea enthusiastically during a news conference on Tuesday, flanked by several Democratic senators. No Republican senators have yet publicly endorsed his bill.

"For firms that play by the rules, this single prudential regulator will provide clarity, cut red tape and make it easier to compete," the Connecticut Democrat said. "But those institutions that would undermine the security of our economy will no longer be able to shop for the weakest regulator."

Currently, banks can choose between the Federal Reserve, the Federal Deposit Insurance Corp (FDIC), the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) as their primary regulator.