NU Online News Service, Feb. 5, 2:29 p.m.EST

Negotiations have broken down over a bipartisan financialservices reform package in the Senate, leaving Democrats to unveiltheir own proposal by the end of the month, Sen. Chris Dodd,D-Conn., chairman of the Senate Banking Committee, said today.

The key issue is apparently the authority to be given a consumerprotection unit that both Democrats and Republicans in the SenateBanking Committee believe should be housed within the TreasuryDepartment.

According to industry lobbyists, Sen. Dodd and Sen. RichardShelby, R-Ala., ranking minority member, have apparently reached animpasse over how much power the new agency would have to imposestandards on the sale of bank and securities products.

House financial services reform legislation creates a ConsumerFinancial Protection Agency, which is opposed by the bankingindustry. The key problem the banking industry has with the CFPAprovision in the House bill is that it provides "reversepreemption," that is, it allows states to impose their consumerprotection standards on products sold in their states.

As contained in legislation passed by the House, the insuranceindustry is exempt from the CFPA.

But Sen. Shelby said in a statement issued later today thatthere is more at issue than consumer protection provisions.

Besides the problem of resolving troubled institutions, he saidother issues involved in the disagreement include derivativesregulation and corporate governance.

"Consumer protection is not the only issue that remainsunresolved," he said. "We must craft a resolution regime thatensures taxpayers will never again bear the losses for risks takenin the private marketplace.

"I will not agree to any legislation until I am satisfied thisgoal is also achieved," he said.

Sen. Dodd has been negotiating with committee Republicans on abipartisan bill since December.

In a statement, Sen. Dodd said, "While I still hope that we willultimately have a consensus package, it is time to move the processforward," adding that he has instructed his staff "to begindrafting legislation to present to the committee later thismonth."

That means Sen. Dodd will likely start with the "RestoringAmerican Financial Stability Act of 2009, legislation Sen. Doddintroduced in November but later abandoned in favor of having allmembers of his committee participate in drafting a more bipartisanbill.

The original Dodd bill created an Office of National Insurance;calls for a study and report on modernization and improvements tothe system of insurance regulation; and includes the Non-admittedand Reinsurance Reform Act of 2009, as introduced last year in boththe House and Senate.

The surplus lines provisions, as well as provisions creating anONI, are also included in the House bill.

In his comments today, Sen. Dodd said in his new bill he wouldincorporate components of provisions hammered out in the bipartisantalks.

"Over the past two months we have had productive bi-partisannegotiations in a number of areas and I intend to incorporate manyof those agreements in this new proposal," he said, noting however,that "Last night, Sen. Shelby assured me that he is still committedto finding a consensus on Financial Reform, but for now we havereached an impasse."