updated 3/15/2010 5:39:00 PM ET 2010-03-15T21:39:00

Senate Banking Committee Chairman Chris Dodd's bill to tame the financial markets would give the government broader powers to break up firms that threaten the economy.

The proposal also creates a consumer watchdog within the Federal Reserve.

Here are the key provisions of financial regulation legislation proposed by Dodd:

  • A nine-member Financial Stability Oversight Council, chaired by the treasury secretary and including the Federal Reserve chairman and heads of regulatory agencies, to monitor the financial markets to watch for potential threats to financial system.
  • Federal Reserve gains oversight over the largest, most interconnected financial firms, even nonbanks. With approval of two-thirds of the oversight council, the Fed could force large interconnected firms to break up if they pose a "grave threat" to financial stability.
  • The Fed would lose day-to-day supervision of smaller bank holding companies — those with assets of $50 billion or less.
  • Creates a mechanism to shut down large failing firms, with shareholders and unsecured creditors bearing the losses. Management also would be removed. The costs of such a shutdown would be covered by a $50 billion fund financed by the largest financial firms.
  • A consumer protection division within the Federal Reserve to write regulations on lending, consolidating powers now exercised by various bank regulators. The oversight council could veto those regulations with a two-thirds vote.
  • Regulates derivatives, the complicated financial instruments blamed for accelerating the Wall Street crisis. Negotiations continue on what exceptions to include for corporations that use derivatives as a hedge against price fluctuations.
  • Gives shareholders the right to cast nonbinding votes on executive pay packages.
  • President of the Federal Reserve Bank of New York appointed by the president and confirmed by the Senate for a five-year term.

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