[JURIST] Democrats on the Senate Banking Committee [official website] on Monday introduced the Restoring American Financial Stability Act of 2010 [text, PDF], aimed at increasing financial regulation in the wake of the recent financial crisis. The bill includes a provision meant to protect consumers from predatory lending by creating a Consumer Financial Protection Bureau housed within the Federal Reserve [official website]. The proposed legislation would also give the government the power to break up financial institutions that have been deemed "too big to fail" in order to prevent future situations where the failing of one firm could threaten the entire economy. The "Volcker Rule," prohibiting banks from owning, investing in, or sponsoring hedge funds, private equity funds, or proprietary trading funds for profit where the funds do not benefit the banks' customers, was also included in the proposed legislation. Other provisions included in the bill involve the restructuring of the federal banking system, regulation of the credit-rating agencies, and the creation of a committee to identify and manage risks to the economy. The executive session to mark up the bill is scheduled to begin on Monday.

This bill is the second financial reform bill to be proposed by the Senate Banking Committee following the 2008 financial crisis. The 2009 bill [text, PDF; JURIST report] was met with resistance and resulted in the committee's development of the new bill. In December, the US House of Representatives approved a similar bill [JURIST report]. The US House Financial Services Committee [official website] had approved a bill to create a consumer financial protection agency in October, after originally delaying [JURIST reports] it at the behest of financial industry leaders in July. The creation of the agency is a key step in achieving the Obama administration's stated goal of tightening financial industry regulations. In June, the administration proposed a broad series of regulatory reforms [press release; JURIST report] aimed at restoring confidence in the US financial system.