By Michael Flaherty
WASHINGTON (Reuters) - The regulation relief bill drafted by the U.S. Senate Banking Committee Chairman includes changes to the Federal Reserve system and an easing of mortgage rules for the financial industry, according to a person familiar with the draft.
The bill also proposes to raise the threshold for banks to be subjected to enhanced supervision, to $500 billion in assets from $50 billion, said the source, who is a Republican aide on the committee.
The aide did not want to be identified because the draft will not officially be released until noon EST (1500 GMT) on Tuesday.
Since taking over as committee chairman earlier this year, Alabama Republican Richard Shelby has made regulatory relief and financial regulation reform his top priority.
Shelby wants to have one comprehensive bill to bring to the Senate floor, an approach that the committee's top Democrat, Sherrod Brown of Ohio, opposes.
After trying to bring the two sides together, Shelby broke off talks with Brown when an agreement could not be reached, as the Ohio Democrat wanted to limit the bill to relief for small banks and credit unions.
Shelby delayed a committee vote on the bill to May 21 after Democrats complained that information was not getting to them.
While Shelby's sweeping bill goes beyond relief for small banks, it includes measures that Democrats have previously supported, such as requiring the New York Fed President to be appointed by the White House and confirmed by the Senate, the aide said.
Details of the 216 page, eight section draft bill were first reported by the Wall Street Journal.
The bill, according to the aide, would also require Fed Chair Janet Yellen to stand in as vice chairman of supervision, a new Fed post created by the 2010 Wall Street financial reform package known as Dodd-Frank. The White House has yet to fill that role.
Among other proposals are for the Fed's policy setting committee to deliver a quarterly report on monetary policy to Congress, the aide said, and the creation of a commission to review the structure of the Fed's twelve regional banks.
The bill also proposes procedural changes to the Financial Stability Oversight Council, the 10-agency body of financial regulators created by Dodd-Frank.
The aide said the bill would also give banks of any size a safe harbor from federal mortgage underwriting standards—known as qualified mortgage rules—so long as the bank assumes the risk on its own books.
