Reply #4: Senate tackles mortgage finance in bank bill

[ozymandius]

WASHINGTON (Reuters) – The Federal Reserve scored a victory and mortgage bankers suffered a defeat on Wednesday as the Senate took aim at bank supervision and housing finance in its sprawling Wall Street reform effort.

Reversing an earlier plan drawn up by Senator Christopher Dodd, the Senate approved an amendment by a 90-9 vote to preserve Fed supervision of hundreds of smaller banks, instead of transferring them to other regulators.

The vote was a setback for Dodd, the Democratic chairman of the Senate Banking Committee, in his bold effort to rationalize the patchwork U.S. bank supervision system, widely faulted for missing the 2008-2009 financial crisis.

The Senate voted 63 to 36 to end mortgage kickbacks and "liar loans," two practices that led to a proliferation of shaky mortgages in the years before the crisis.

Incentives known as "yield spread premiums" encouraged brokers to steer consumers into risky, high-interest loans even if they qualified for cheaper loans.

http://news.yahoo.com/s/nm/20100512/bs_nm/us_financial_regulation