Senate's Dodd: Paulson plan "not even close"

By Kevin Drawbaugh

WASHINGTON (Reuters) - The Democratic chairman of the U.S. Senate Banking Committee on Monday called the Treasury Department's plan to overhaul financial regulation "a wild pitch" that fails to address the housing market crisis.

Sen. Christopher Dodd of Connecticut said he welcomed the plan offered by Treasury Secretary Henry Paulson, but questioned its relevance in addressing falling home prices, rising foreclosures and the imminent threat of recession.

"To talk about overhauling the regulatory system is a wonderful idea. But frankly it doesn't relate to the issues we're grappling with," Dodd said on a conference call.

"I would call this a wild pitch. ... It's not even close to the strike zone," he said, drawing upon American baseball imagery to criticize Paulson's proposal.

Amid a deepening crisis in housing and credit markets, Paulson on Monday issued a sweeping plan that calls for giving the Federal Reserve more authority over Wall Street, cracking down on mortgage brokers, reshuffling the duties of some agencies and setting up a federal insurance regulator.

Although the plan has been under development for many months, Dodd said he had not been asked for input on it.

Noting that some of the ideas in the Paulson plan have been under discussion for years, Dodd said reorganizing the government was not the problem.

"The failure of the administration to utilize the tools they've been given over the years. ... That's the problem, not reorganization," he said.

Senate Majority Leader Harry Reid said on the same conference call with reporters that he plans to seek a procedural vote on the Senate floor on Tuesday on a foreclosure prevention bill that Republicans blocked in February.

The bill, drafted by Democrats, would let judges erase some of the mortgage debt of homeowners in bankruptcy, a contentious proposal backed by homeowner advocates but opposed by bankers.

It would also devote more federal money to fixing abandoned properties and funding debt counseling, as well as give hard-hit homebuilders a tax break.

The White House has threatened to veto the bill, calling it too costly and a bailout for lenders and speculators.

Reid said recent months have shown the Bush administration's hands-off approach to markets "simply doesn't work." The Nevada Democrat said the Paulson plan "is certainly a step in the right direction."

But he added, "Anything he's talking about doing will impact the future ... We feel the White House should direct their attention to what needs to be done now, not what needs to be done in the future."

(Reporting by Kevin Drawbaugh; Editing by Jonathan Oatis)