Senate closer to easing Dodd-Frank law
WASHINGTON — The Senate advanced legislation Tuesday to scale back some of the safeguards Congress put in place to prevent a repeat of the financial crisis. Enough Democrats supported a procedural vote on the bipartisan bill to show it has a good chance of passage in the coming days.
The move to alter some key aspects of the DoddFrank law comes 10 years after the financial crisis rocked the nation's economy. The bill has overwhelming Republican supindustry port and enough Democratic backing that it's expected to gain the 60 votes necessary to clear the Senate. That was reflected in the 67-32 vote Tuesday, with 16 Democrats and one independent voting to move ahead with consideration of the bill.
Several Democratic lawmakers facing tough reelection races this year have broken ranks with Minority Leader Chuck Schumer, DN.Y., and Sen. Elizabeth Warren, D-Mass.
Sen. Jon Tester, D-Mont., said he was proud to support Dodd-Frank eight years ago, but the bill had unintended consequences, which he said included consolidation in the banking and a decline in small-business lending. He said local banks in Montana have suffered from regulations designed to rein in Wall Street.
Nonpartisan congressional analysts say the legislation would slightly increase the probability of a big bank failure.
The Congressional Budget Office estimates the bill would increase federal deficits by $671 million between 2018 and 2027 if it became law.
“Dodd-Frank's enormous regulatory burden has been inefficient and unhelpful for financial institutions of all sizes, but it has hit Main Street lenders especially hard,” Senate Majority Leader Mitch McConnell said.
The legislation would increase the threshold at which banks are subject to stricter capital and planning requirements. Lawmakers are intent on easing those rules for midsize and large regional banks, asserting that would boost lending and the economy.
Banks have long complained about the cost of complying with the many requirements of DoddFrank. Under the Senate bill, some of the nation's biggest banks would no longer have to undergo an annual stress test conducted by the Federal Reserve. The test assesses whether a bank has enough capital to survive an economic shock and continue lending. Dozens of banks would also be exempted from making plans called “living wills” that spell out how the bank will sell off assets or be liquidated in a way that won't create chaos in the financial system.
The Senate legislation increases from $50 billion to $250 billion the threshold at which banks are considered critical to the system. The change would ease regulations on more than two dozen financial companies, including BB&T Corp., Sun Trust Banks Inc. and American Express.
Opponents of the bill argue that the same banks getting regulatory easing through the Senate bill also got about $50 billion in taxpayer-funded bailouts during the financial crisis. They note Countrywide Financial, which was at the center of the mortgage crisis, was smaller than some of the banks targeted for relief now.