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Bill Radke: Meanwhile, an overhaul of federal banking rules is one step closer, after the Senate Banking Committee gave it a go-ahead yesterday. The bill, written by Democratic Chris Dodd, gives the government new powers to prevent too-big-to-fail companies from bringing down the financial system. But Marketplace’s John Dimsdale reports critics say the bill is full of loopholes.

John Dimsdale: Critics of the Senate bill say one loophole in Senator Dodd’s proposal is to let the Federal Reserve keep lending money to struggling banks. FDIC chairman Sheila Bair says that’s the same as a government bailout.

Many lawmakers, including Dodd, support amendments to get rid of the Fed’s emergency lending powers, says Chris Bruce, who follows bank regulations for the Bureau of National Affairs.

Chris Bruce: There’s a desire on both sides of the aisle to avoid a lot of the kind of unintended consequences that chairman Bair is talking about.

Dodd’s proposal also requires big banks to pay $50 billion into a fund to cover failing banks. But some critics say markets will see that as another TARP-like slush fund for badly-run banks that should just be allowed to fail.

In Washington, I’m John Dimsdale for Marketplace.