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The House of Representatives is expected to vote on legislation on Tuesday that would rewrite parts of Dodd-Frank. The bill has already cleared the Senate, and if passed, it would mark one of the most significant overhauls of financial industry rules in nearly a decade.
Republicans and Democrats in Congress have finally found something they can agree on, and it’s not immigration, or gun control, or health care. It’s easing some rules for banks.
The House of Representatives is expected to vote on Tuesday on legislation passed by the Senate in March that would rewrite parts of the 2010 Dodd-Frank Act, the landmark financial regulation overhaul enacted in response to the 2008 financial crisis. The bill, sponsored by Senate Banking Committee Chair Mike Crapo (R-ID), cleared the Senate with ease, 67 to 31, earning support from 16 Democrats and Sen. Angus King (I-ME) in addition to 50 Republicans. It’s expected to clear the House as well, and it’s not yet clear which Democrats, if any, might support it there.
The bill, if passed, would be one of the most significant rewrites of financial industry rules in nearly a decade. It would lessen regulatory scrutiny on smaller banks, including regional banks like BB&T, SunTrust Banks, Key Bank, and American Express, as well as community banks and credit unions.
The bill’s proponents say it is an example of bipartisanship at its best. But progressives say it goes too far and that it purports to help small community banks when its changes really benefit large financial institutions.
And the bill itself has exposed fault lines within the Democratic Party: Progressives and many 2020 presidential hopefuls in the Senate have lined up against the legislation, while some moderates and those from rural states support it and seek to hold it up as an example of their ability to work in a bipartisan manner.
The bill changes what size banks regulators scrutinize
The Dodd-Frank bill, which was passed in 2010 in response to the financial crisis, aimed to decrease various risks across the financial system and increase regulatory oversight to prevent such a meltdown from happening again. Republicans have wanted to unravel Dodd-Frank essentially since it became law, and President Donald Trump vowed to “do a big number” on it soon after taking office.
At the core of the new bill — the Economic Growth, Regulatory Relief, and Consumer Protection Act — is the assumption that Dodd-Frank financial overhaul was overly aggressive and harmed smaller banks.
One provision of the new bill would raise the threshold at which banks are subject to certain federal oversight, including stress tests that measure a bank’s ability to withstand an economic downturn. If a bank fails a stress test, the Federal Reserve curbs its ability to return money to shareholders via dividends and stock buybacks and requires it to shore up its capital reserves. Under current law, banks with assets of $50 billion or more are considered systematically important financial institutions (often referred to as SIFIs) and are therefore subject to stricter oversight from the Federal Reserve.