Dodd's committee choice a negative for banks: study

WASHINGTON (Reuters) - U.S. Senator Christopher Dodd said on Wednesday, as expected, that he will remain chairman of the Senate Banking Committee, a move that one policy research study called a negative for banks.

Dodd said at a news conference that he had decided to stay in his post -- and not take over the Senate Health, Education, Labor and Pensions (HELP) Committee -- so that he can tackle the job of financial regulation reform.

"I'm going to get that job done," he said. "We'll see these reforms adopted, hopefully by the end of this year."

Dodd had been rumored to be the replacement for the late Sen. Edward Kennedy, his close friend, as HELP chairman.

But Sen. Tom Harkin laid claim to that job on Wednesday. Harkin's former post as chairman of the Senate Agriculture Committee will be filled by Sen. Blanche Lincoln.

"Senator Dodd's decision to stay with Senate Banking is a negative, in our view, for the banks and the financial services sector," said Teddy Downey, policy analyst at Concept Capital, an investment research firm in Washington.

The banking panel and Dodd have a key role to play in an effort by the Obama administration and congressional Democrats to tighten regulation of markets and banks, including major institutions such as Goldman Sachs, Citigroup, JPMorgan Chase, Bank of America and others.

"We believe Dodd is likely to become more populist in the next 12 months as he nears reelection," Downey said.

"That bodes ill for the banks, which are under threat from legislation that would limit overdraft fees, further regulate mortgages and create a Consumer Financial Protection Agency that could sharply curtail how banks interact with customers.

"In brief, the banking sector will continue dealing with a Senate Banking chairman who needs to show voters that he is not captive to the financial sector. That is never a positive development," he said.

By staying at banking, Dodd could prevent additional delays in an already bogged-down push for financial reform in response to the 2008-2009 financial crisis, the worst in decades.

Harkin and Dodd have both been deeply involved in recent weeks in the high-profile healthcare reform debate, assuming the burdens of the health panel chairmanship as Kennedy struggled against terminal brain cancer. He died last month.

Harkin said at the news conference in the Capitol that Dodd would "continue to shepherd the healthcare bill, on behalf of our committee, through the Senate."

Dodd underwent successful surgery for early-stage prostate cancer in August and is recovering well. He faces a difficult reelection campaign in 2010 at home in Connecticut.

(Additional reporting by Charles Abbott and Thomas Ferraro, editing by Matthew Lewis)