Washington, D.C., USA: In a 67-31 vote, The Senate on Wednesday passed a bipartisan bill that will provide some regulatory relief and exempt dozens of banks from the quagmire that is Dodd-Frank, the Wall Street reform law enacted by former President Obama in 2010. All present Republicans and 13 Democrats voted to approve the measure which is the most sweeping changes yet to Dodd-Frank, sending it to the House – and advancing it past a potential filibuster.
The bill, which passed the Senate 67-31, is surely not all the industry wanted. But it is still a clear win for banks — particularly smaller ones — that have abhorred Dodd-Frank.
“This bill was a bipartisan compromise, the changes are commonsense, and it will allow financial institutions to better serve their customers and communities, while maintaining safety and soundness and important consumer protections,” Banking Committee Chairman Mike Crapo, R-Idaho, a leading sponsor of the bill, said on the floor ahead of the vote.
Supporters argue that the bill would free small banks and credit unions from unnecessary rules and would help boost investment in struggling communities. Critics say the bill is a gift to Wall Street wrapped in false claims that it could rescue smaller lenders.
The bill will now head to the House, where conservatives are demanding stronger curbs to Dodd-Frank before pledging their support.
The Crapo bill releases dozens of banks from tougher Federal Reserve oversight and frees smaller firms from regulations intended to prevent mortgage fraud and discrimination.
Supporters insist that it will boost economic growth and help struggling community banks that have been saddled with billions of dollars in added compliance costs since the passage of Dodd-Frank.
The bill relaxes a number of standards for small and regional banks, tweaking mandates around the Federal Reserve’s stress tests, the Consumer Financial Protection Bureau’s “qualified mortgage” rule, the Volcker Rule and much more.
Banks with less than $250 billion in assets would no longer be subject to yearly Federal Reserve stress tests or higher capital requirements meant to ensure risky firms could weather a lending situation. Those banks would also be exempt from submitting for Fed approval a “living will” that outlines how a company could be liquidated upon failure without causing a widespread meltdown.
The threshold for tighter Fed regulation is currently set at $50 billion, and the increase would free several major regional banks, including M&T, Citizens, SunTrust, BB&T, Fifth Third, and BMO Financial Corp.
The bill also exempts banks that extend 500 or fewer mortgages a year from reporting some home loan data to federal regulators and broadens the definition of qualified mortgages.
Foreign banks with U.S. holdings less than $250 billion but above that level in foreign assets would still be subject to closer oversight. Provisions to force credit bureaus to offer free services for victims of hacks, protect military veterans from fraud, create new student loan backstops and mandate studies on various risks to the financial system were also added to the bill.
The bill’s future in the House is uncertain. The measure is seen by critics of Dodd-Frank as perhaps the last, best chance of a major legislative revision to the 2010 rules. Republicans are also eager to tout a major rollback of Obama-era rules as they head into the midterm elections.
But the Senate bill makes far fewer and weaker changes to Dodd-Frank than those sought by the House. Conservatives that spearheaded the House’s 2017 bill to rewrite Dodd-Frank want to add several measures intended to take a bigger chunk out of the law.
The House passed a much more sweeping piece of legislation, the Financial Choice Act, last June. While that bill failed to garner necessary support from moderate Democrats in the Senate, there are a subset of bipartisan regulatory relief provisions that House Republicans could try to incorporate into the Senate bill.
The odds of changes to the bill increase if the House passes a different version, forcing the two chambers to sort out their differences in a conference committee.
President Trump has said that Dodd-Frank is a mess. Nigeria Circle News completely agrees. 372 page Dodd-Frank law is one hell of a mess. Whatever version of this bill finally ends up on the President’s desk – after it passes both chambers – will be just a start.
Dodd-Frank law needs to be repealed completely. It is arguably the most economically devastating law in America today and for good reason which will be the subject of another article.
Of all of Former President Obama’s accomplishments – and it’s a very long list – Dodd-Frank law is proof that Finance and Economics is not one of his strong points. What the U.S. economy needs now is to repeal Dodd Frank. A radical simplification after Dodd-Frank is repealed could be to bring back Glass-Steagall in the interim, while Congress works on a permanent replacement for Dodd-Frank.