"Our proposal will replace the myriad government agencies that failed to rein in risky schemes with a single, accountable federal banking regulator," Dodd said in a statement. "We will do this while preserving the dual banking system with a separate division for community banks that have never posed, and do not now pose, the same risks as these huge financial institutions."

Dodd adds that a single regulator will cut red tape and make it easier to compete for firms that play by the rules. "But those institutions that would undermine the security of our economy will no longer be able to shop for the weakest regulator," he said.

The U.S. banking regulatory system developed piece by piece over many decades. The U.S. has never overhauled a system that started to build in the early 1900s. Pieces have been added on as the financial industry grew. Dodd believes it's time for a complete overhaul and does not want to create yet another piece, as desired by the Obama administration and Rep. Barney Frank, the Democrat from Massachusetts.

If Frank and the administration win, rather than having one regulator, we will be left with four and a new council -- the Financial Services Oversight Council -- to monitor systemic risks. The council will identify financial companies and financial activities that pose a threat to financial stability. These companies will be subject to heightened oversight, standards and regulation. The council will also be responsible for greater scrutiny of systemically important financial market utilities and payment, clearing and settlement activities.

Another critical area that will be addressed is removal of the loopholes in regulations that allow financial institutions to shop for the easiest watchdog. The council will improve communication among regulators and make sure to close these loopholes.

Current nonbank banks (banks that don't offer both lending and depositing services), industrial loan companies and similar companies that engage in commercial activities -- but are not currently subject to bank holding company regulation -- will not have to divest. But they will have to restructure, creating a bank holding company to house all financial activities.

What's more, they'll also face limits on transactions between the bank holding company and any commercial affiliates. You can review the full bill at the House Committee on Financial Services website

Other than the major difference on how to supervise the banks, the House and Senate bills are very similar on the other key changes for the financial industry. While the Senate bill is comprehensive, the House bill breaks up the legislation in several pieces.

Key provisions you'll find in both the Senate and House bills include:

• Consumer Financial Protection Agency is created as an independent watchdog to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards and other financial products, while prohibiting hidden fees, abusive terms and deceptive practices.
• Institutions "too big to fail" will face tough new capital and leverage requirements, including a requirement for writing their own "funeral plans." The new requirements will prevent the creation of excessively large or complex financial companies than can bring down the economy by: creating a safe way to shut them down if they fail. The industry will be required to provide its own capital injections; and updating the Fed's lender of last resort authority to allow system-wide support but not prop up individual institutions. Rigorous standards and supervision will be established to protect the economy and American consumers, investors and businesses.
• Protects against systemic risks by creating an independent agency with a board of regulators to identify and address systemic risks posed by large, complex companies, products and activities before they threaten the stability of the financial system. The agency could require companies that threaten the economy to divest some of their holdings.
• Provides shareholders with a say on pay and corporate affairs with a non-binding vote on executive compensation and director nominations.
• Eliminates loopholes that allow risky and abusive practices to go on unnoticed and unregulated -- including loopholes for over-the-counter derivatives, asset-backed securities, hedge funds, mortgage brokers and payday lenders.
• Protects Investors with new tough new rules for transparency and accountability from investment advisors, financial brokers and credit rating agencies to protect investors and businesses.
• Strengthens oversight and empowers regulators to aggressively pursue financial fraud, conflicts of interest and manipulation of the system that benefit special interests at the expense of American families and businesses.

But don't get too attached to any of these provisions. The legislative process is just starting, and I can guarantee that lobbying for changes will be intense among financial institutions and all interested parties. Now that the House and Senate have a major difference on banking regulation, that will make finding a compromise even more difficult. We can only hope that in the end taxpayers are truly protected from ever having to bail out Wall Street again.

Lita Epstein has written more than 25 books including Reading Financial Reports for Dummies and Trading for Dummies.