The GOP plan

The Washington Post - - FRONT PAGE - BY RE­NAE MERLE AND JONNELLE MARTE re­nae.merle@wash­post.com jonnelle.marte@wash­post.com

to erase Obama-era Wall Street reg­u­la­tions would re­peal the “Vol­cker rule” re­strict­ing big banks’ abil­ity to make risky bets.

House Repub­li­cans are launch­ing an ag­gres­sive ef­fort to undo reg­u­la­tions put in place un­der Pres­i­dent Barack Obama to rein in Wall Street, po­ten­tially of­fer­ing the in­dus­try sweep­ing re­lief from dozens of rules.

The nearly 600-page draft leg­is­la­tion, known as the Fi­nan­cial Choice Act 2.0, takes aim at sev­eral crit­i­cal por­tions of 2010’s Dodd-Frank Act, in­clud­ing weak­en­ing the Con­sumer Fi­nan­cial Pro­tec­tion Bureau and ditch­ing rules that re­strict banks’ abil­ity to make risky fi­nan­cial bets.

“Dodd-Frank failed to keep its prom­ises to the Amer­i­can peo­ple, but we will work with Pres­i­dent Trump to fol­low through on his prom­ise to dis­man­tle Dod­dFrank,” Rep. Jeb Hen­sar­ling (RTex.), chair­man of the House Fi­nan­cial Ser­vices Com­mit­tee, said in a state­ment.

Hen­sar­ling has been work­ing on the leg­is­la­tion for more than a year and ini­tially in­tro­duced a ver­sion last year. But un­der the Obama ad­min­is­tra­tion the roll­back did not have much chance of be­ing signed into law and the ef­fort largely stalled. Now, Pres­i­dent Trump has made reg­u­la­tory re­lief a pri­or­ity and has promised sev­eral times to “do a num­ber” on Dodd-Frank, giv­ing Hen­sar­ling’s leg­isla­tive ef­forts new life.

The Fi­nan­cial Ser­vices Com­mit­tee is sched­uled to hold its first hear­ing on the bill next week. While it has a good chance of be­ing ap­proved in the House, it still faces long odds in the Se­nate, where it would need to gain the sup­port of some Democrats.

“The Amer­i­can peo­ple be­lieve that Congress should do more to rein in Wall Street, but Chair­man Hen­sar­ling’s new bill shows House Repub­li­cans are not lis­ten­ing,” Sen. Sher­rod Brown (Ohio), the rank­ing Demo­crat on the Se­nate Bank­ing Com­mit­tee, said in a state­ment. “The spe­cial in­ter­ests and their lob­by­ists who are hell-bent on rewrit­ing the rules in Wall Street’s fa­vor couldn’t have drafted a bet­ter bill them­selves, if in­deed they didn’t,” he said.

At its core, the pro­posed leg­is­la­tion of­fers the coun­try’s nearly 6,000 banks a choice: If they want to avoid many of the reg­u­la­tory bur­dens im­posed by Dod­dFrank, they must sig­nif­i­cantly in­crease their emer­gency fi­nan­cial cush­ion. That way even if they run into fi­nan­cial trou­ble, the banks will have enough money to sur­vive with­out tax­pay­ers’ help, Hen­sar­ling has said.

Most big banks are likely to forgo that op­tion. They have been pes­ter­ing reg­u­la­tors to let them hold on to less cap­i­tal, not more. Cre­at­ing the large fi­nan­cial cush­ion called for by Hen­sar­ling’s bill would be too costly for many big banks, in­dus­try of­fi­cials say.

The in­dus­try has al­ready spent bil­lions of dol­lars im­ple­ment­ing Dodd-Frank reg­u­la­tions. That money is “al­ready a sunk cost,” said a rep­re­sen­ta­tive of the fi­nan­cial-ser­vices in­dus­try who spoke on the con­di­tion of anonymity to com­ment can­didly on the pro­posed leg­is­la­tion. “It’s un­likely that large in­sti­tu­tions would opt for that off-ramp.”

Still, the bill pro­poses sev­eral changes that could pro­vide sig­nif­i­cant re­lief to Wall Street and, in some cases, goes fur­ther than even in­dus­try of­fi­cials had hoped.

The bill, for ex­am­ple, would re­peal the “Vol­cker rule,” which re­stricts big banks’ abil­ity to make risky fi­nan­cial bets. The in­dus­try has largely been ask­ing that the rules gov­ern­ing that trad­ing be sim­pli­fied, but Hen­sar­ling goes fur­ther, do­ing away with it all to­gether.

Re­peal­ing that provi­sion could boost the prof­its of some of the in­dus­try’s big­gest play­ers by nearly $2 bil­lion next year, ac­cord­ing to re­search by No­mura, a global in­vest­ment bank. Goldman Sachs and JPMor­gan Chase could re­spec­tively re­coup $446 mil­lion and $469 mil­lion in prof­its, the re­search showed.

Hen­sar­ling’s bill also in­cludes a blue­print for de­fang­ing the Con­sumer Fi­nan­cial Pro­tec­tion Bureau by strip­ping the agency of some of its most im­por­tant pow­ers. It would no longer be able to write ma­jor rules reg­u­lat­ing con­sumer fi­nan­cial com­pa­nies, such as debt col­lec­tors, with­out get­ting ap­proval from Congress. It would also no longer be able to levy hefty fines against fi­nan­cial in­sti­tu­tions for “un­fair” or “de­cep­tive” prac­tices. The CFPB used those pow­ers to fine Wells Fargo $100 mil­lion last year for open­ing up to 2 mil­lion ac­counts cus­tomers did not ask for or know about.

Democrats have promised to fight at­tempts to weaken the agency’s pow­ers. “We would have a muz­zled watch­dog at best,” said Brian Sim­monds Mar­shall, pol­icy coun­sel for Amer­i­cans for Fi­nan­cial Re­form, a coali­tion of more than 200 civil rights, con­sumer and la­bor-ori­ented com­mu­nity groups. “You would have an agency that did not have the au­thor­i­ties it needs to pro­tect con­sumers.”

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