MCCONNELL EXPECTS TO BRING BILL TO FLOOR SOON
billion or more are considered “systemically important financial institutions” and therefore governed by stricter rules. The bill would raise that threshold to institutions with assets of $250 billion or more, leaving fewer than 10 big banks in the United States subject to the stricter oversight.
Banks with assets of $50 billion to $100 billion would be immediately freed from those requirements. Financial institutions with $100 billion to $250 billion in assets, such as BB&T and American Express, would no longer be subject to tougher rules after 18 months, although the Federal Reserve would retain the authority to periodically conduct stress tests on those firms.
Senate Majority Leader Mitch Mcconnell, R-KY., is expected to bring the bill to the Senate floor within the next month.
Hurdles remain. The House has passed its own far more sweeping deregulatory effort. And progressive Democrats who warn that the legislation would return Wall Street to its more reckless past are mobilizing in hopes of derailing the legislation — even if that means attacking fellow Democrats who support it.
“This bill increases the risk of another taxpayer bailout, and I will continue to challenge supporters of this bill — from both parties — to explain why they stand on the side of big banks instead of working families,” said Sen. Elizabeth Warren, D-mass.
Still, lobbyists, lawmakers and administration officials are saying this is the make-or-break year for overhauling Doddfrank.
Rob Nichols, president of the American Bankers Association, said the legislation would correct what banks view as regulatory overreach borne of a hasty legislative effort to shore up a cratering financial system after the 2008 crisis. “What I do think is significant here is that you have a recognition that’s been building for several years that parts of the policy response were misguided, ill-conceived and missed the mark,” Nichols said.
Banking giants such as J.P. Morgan and Goldman Sachs — which would see little in the way of change under the Senate bill — have said little about the looming legislation. But Jamie Dimon, chief executive of J.P. Morgan, has been a vocal proponent of revising the Dodd-frank law, saying in a letter to shareholders in April that “poorly conceived and uncoordinated regulations have damaged our economy, inhibiting growth and jobs.”
Some industry lobbyists have pointed out that rules ushered in after the financial crisis have in some ways been beneficial for the big banks, acting as a barrier to entry for any bank without the resources to handle the additional compliance costs.
The bill that is working its way through the Senate was brokered primarily by Sen. Mike Crapo, R-idaho, the chairman of the banking committee, and moderate Democrats such as Sens. Heidi Heitkamp of North Dakota, Jon Tester of Montana, Joe Donnelly of Indiana and Mark Warner of Virginia. Eleven Senate Democrats are co-sponsoring the bill, making its passage in the Senate likely.
Backers argue that the bill would offer much-needed relief to small banks and credit unions in parts of America that have been struggling under regulations that had primarily been aimed at the biggest banks.
“A lot of what was ‘too big to fail’ under Dodd-frank became ‘too small to succeed’ because of the onerous regulatory burdens,” Heitkamp said.
Still, in a sign of the fight to come, critics — including some House members — say the Senate legislation does not go far enough. House Republicans passed a far more aggressive bill last summer, which would be far more crippling to Dodd-frank. That bill would, among other things, remove the prohibition against using federally insured funds for risking lending and gut the Consumer Financial Protection Bureau. Under the Senate bill, it would remain intact.
Many House Republicans could find it difficult to back a bill that leaves the bureau unscathed, but weakening it has almost not chance in the Senate.
The Trump administration has signaled its support of the Senate bill, with Gary D. Cohn, director of the White House’s National Economic Council, telling Bloomberg News this month that the Senate bill would “change the regulatory environment for the vast, vast majority of banks in the United States.”
The appointment last year of Randal K. Quarles as the Federal Reserve’s vice chairman for supervision is also expected to benefit those seeking looser oversight: Quarles has suggested that some of the strictures imposed on the financial industry since 2008 should be relaxed.
“I think the bigger changes to Dodd-frank in 2018 will come from changes at the regulators from the new regulatory team and not from new legislation, even if it is enacted,” said Aaron Klein, policy director of the Center on Regulation and Markets at The Brookings Institution.