House GOP backs bill to undo much of Dodd-Frank

Christopher Dodd, D-Conn., right, and then- House Financial Services Committee Chairman Rep. Barney Frank, D-Mass., speak to reporters outside the White House in Washington, after their meeting with President Barack Obama.

Lawmakers made their most significant adjustment to the CHOICE Act on Tuesday, when the Rules Committee approved a manager's amendment that omitted language repealing Dodd-Frank's required limits on debit card swipe fees.

Industry watchers, though, had doubted the new administration's desire to roll back regulations to such an extent, and Mnuchin ended speculation last month in an appearance before the Senate Banking Committee.

Republican leaders in the U.S. House of Representatives on Wednesday said that the so-called Financial Choice Act, a bill that would essentially repeal and replace much of the Dodd-Frank Act and is up for a floor vote later this week, is the centerpiece of their deregulatory agenda. Having more capital in the economy is something Republicans believe will lead to increased lending, particularly among community banks.

In a near party-line vote, the House approved a bill, dubbed the Financial CHOICE Act, which scales back or eliminates numerous post-crisis banking rules.

Crafted by Financial Services Committee Chairman Jeb Hensarling, the bill is expected to pass today. Advocates for the change say that requiring banks to build up capital as a condition for regulatory relief would help roll back the risk that federal regulations are meant to mitigate.

House Republicans are preparing to dismantle financial rules established under President Barack Obama that were created to head off economic meltdowns like the one that caused millions of Americans to lose their jobs and homes during the Great Recession. His bill targets the heart of the law's restrictions on banks by offering a trade-off: Banks could qualify for most of the regulatory relief in the bill so long as they meet a strict basic requirement for building capital to cover unexpected big losses. But it faces a much tougher test in the Senate, where the Republican majority is not as commanding.

What's more, the argument that "not a single dollar" goes to bailing out Wall Street under the proposed law is further misdirection.

Rep. Walter Jones of North Carolina was the only Republican to vote against the bill. Dodd-Frank instituted major regulations on banks and expanded the influence of the federal government in the economy.

"At the end of the day, Dodd-Frank didn't help Main Street".

More controversially for Democrats, the bill would weaken the Obama-era Consumer Financial Protection Bureau which was set up to investigate consumer complaints against financial institutions.

Frank says his namesake financial reform law has been too restrictive on smaller banks.

The bill would repeal a rule that bans banks from engaging in propriety trading or forming certain relationships with private equity funds. Also, financial regulators would lose the power to dismantle a failing financial firm and sell off the pieces if they decide its collapse could endanger the system.

Michael Barr, who was the assistant secretary for financial institutions at the U.S. Treasury for two years during the Obama administration and was an architect of Dodd-Frank, said the law's opponents are trying to gut it.

Dodd-Frank also established a process when the federal government could break-up and wind down a failing financial company whose failure threatens financial stability in the United States.

This has shut out credit unions and community banks across the country from being able to compete in the mortgage market, because they simply do not have the ability to satisfy the requirements of Dodd-Frank.

A handful of amendments are slated for a floor vote, including a proposal from Rep. Lloyd Smucker (R-Pa.) that would pressure consumer credit reporting agencies to boost identity theft protection and an amendment authored by Rep. Martha McSally (R-Ariz.) that would require the Treasury Department to file a report to Congress on how federal regulators deal with financial flows across the USA border with Mexico. "Congress also should be wary of considering this bill in smaller parts, which would favor predatory lenders and other scam artists".

The bill would have the biggest impact on the largest USA banks, including Citigroup Inc.

The Federal Reserve counted 5,031 commercial banks as of May 1.

  • Zachary Reyes