How GOP bill would dismantle many Dodd-Frank restrictions
By Marcy Gordon?|?AP June 8, 2017 at 1:13 PM
WASHINGTON — Emboldened by a business-friendly president, Republicans in Congress have set a goal that is nothing if not ambitious: To undo the stricter banking rules that took effect after the devastating 2008 financial crisis.
A vote Thursday to approve the bill in the House is essentially assured. The landscape is far different in the Senate, where Democrats have the votes to block it.
The 2010 Dodd-Frank law imposed the stiffest restrictions on big financial companies since the Great Depression. It curbed many banking practices and expanded consumer protections to restrain reckless practices and prevent a repeat of the 2008 meltdown.
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The House bill, pushed by Rep. Jeb Hensarling, the Texas Republican who leads the Financial Services Committee, would repeal about 40 of Dodd-Frank’s provisions. Notably, it would sharply diminish the authority of the Consumer Financial Protection Bureau, which oversees the practices of companies that provide products and services from credit cards and payday loans to mortgages and debt collection.
President Donald Trump launched his attack on Dodd-Frank after taking office, ordering a Treasury Department review of the complex rules that have put the legislation into practice. Trump called the law a “disaster” whose restrictions have crimped lending, hiring and the overall economy.
One part of Treasury’s review is expected to be released soon. It could provide a blueprint for regulators to rewrite the rules. But Congress’ legislation would be needed to actually revamp the law.
Unwinding a complex law that clocks in at 2,300 pages takes its own hefty bill: The Republicans’ Financial Choice Act, as it’s called, runs 580 pages. Here’s a look at key changes it would make:
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BANK REGULATION
Under the House bill, banks could qualify for regulatory relief if they held enough capital to cover potential big losses — a 10-1 ratio of capital over borrowed money. In exchange, such banks would gain exemptions or eased requirements for “stress tests” to assess their ability to withstand a downturn and for their plans to reshape themselves if they failed.
During the crisis, the government intervened to rescue the largest banks from collapse and saved some faltering institutions with bailouts and emergency loans or helped sell them to other banks. Trillions of taxpayer dollars were put at risk.
To avoid endangering taxpayers again, Dodd-Frank authorized regulators to dismantle a failing big firm, if they felt its collapse could endanger the entire system, and sell off the pieces. The Treasury would pay the firm’s obligations and be repaid with industry fees and money raised from shareholders, bondholders and asset sales.
Critics argue that that means taxpayers could still end up on the hook. The new legislation would eliminate the regulators’ power to dismantle firms.
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VOLCKER RULE
This rule, which bars the biggest banks from trading for their own profit, would be repealed. The idea behind the rule was to prevent high-risk trading bets that could imperil federally insured deposits. Some banks argue that the Volcker Rule stifles legitimate trading on behalf of customers and the banks’ ability to hedge against risk.
Republicans have stressed the need for regulatory relief from Dodd-Frank for community banks. And in a fairly rare area of bipartisan agreement, some Democratic lawmakers have indicated support for this, at least in theory.
The legislation would exempt smaller banks from a number of Dodd-Frank requirements. Banks with under $10 billion in assets, for example, would have to run “stress tests”— gauging their ability to withstand a severe economic downturn — just once a year instead of twice.
FILE - In this May 21, 2010, file photo, then-Senate Banking Committee Chairman Sen. 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. House Republicans headed toward a vote June 8, 2017, on dismantling sweeping financial rules established under Obama that were designed to head off economic meltdowns. Republicans are arguing that the many requirements imposed under what is known as the Dodd-Frank Act have actually harmed economic growth by making it harder for consumers and businesses to get credit. (Susan Walsh, File/Associated Press)
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