Senate passes bill easing Dodd-Frank bank rules
WASHINGTON — The Senate passed bipartisan legislation Wednesday designed to ease bank rules that were enacted to prevent a relapse of the 2008 financial crisis that caused millions of Americans to lose their jobs and homes.
The Senate voted 67-31 for a bill from Republican Sen. Mike Crapo of Idaho that would dial back portions of the law known as DoddFrank.
The legislation would increase the threshold at which banks are considered so big and plugged into the financial grid that if one were to fail, it would cause major havoc. Those banks are subject to stricter capital and planning requirements. Lawmakers are intent on loosening the restraints on them in hopes that it will boost lendingand the economy.
President Donald Trump signaled that he’ll sign the bill once it gets through Congress. Dismantling DoddFrank was one of his campaignpledges.
“The bill provides muchneeded relief from the DoddFrank Act for thousands of community banks and credit unions, and will spur lending and economic growth without creating risks to the financial system,” the White House said in a statement after the vote.
Republicans unanimously supported the bill, while Democrats splintered into two camps. One included several senators from rural states who worked out the compromisewith Mr. Crapo.
The other, led by Sens. Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio, said the bill catered too much to the banks that contributed to the financial crisis and would increase the likelihood of future taxpayer bailouts.
“Big banks and their lobbyists are about to score a touchdown at the expense of hardworking families across the country,” Mr. Brown said shortlybefore the vote.
The bill makes a fivefold increase, to $250 billion, in the level of assets at which banks are deemed to pose a potential threat if they failed. The change would ease regulations and oversight on more than two dozen financial companies, including BB&T Corp., SunTrust Banks, Fifth Third Bancorp andAmerican Express.
Eventually, the exempted banks would no longer have to undergo an annual stress test conducted by the Federal Reserve.
The test assesses whether a bank has enough of a capital buffer to survive an economic shock and continue lending. The banks also would be excused from submitting plans called “living wills” that spell out how a bank would sell off assets or be liquidated in the event of failure so that it wouldn’t create chaos in the financial system.
Mr. Crapo, chairman of the Senate Committee on Banking, Housing and Urban Affairs, emphasized that the Federal Reserve would still have the authority to apply tougher standards for banks with between $100 billion and $250 billion in assets. “This bill, Mr. President, is a bill designed to protect community banks and credit unions, and that’s why we have such bipartisan support for it.”
In arguing against the bill, Mr. Brown noted that the Congressional Budget Office found that it would slightly increase the probability of a big bank failure, which wouldadd to the deficit.
Other features of the bill would exempt certain banks and credit unions from requirements to report some mortgage loan data. That exempted data includes the age of a loan applicant, credit score, total loan costs and interest rate. Ms. Warren, an outspoken opponent of the change, said the bill would make it easier for banks to discriminate against minorities seeking home mortgages andgo undetected.
In response to the Equifax breach that exposed personal information for more than 145 million Americans, the bill would require free credit freezes for all consumers affected by data breaches. Currently most states allow the credit reporting companies to charge consumers a fee for freezing their credit.
The House has already passed a more expansive rollback of Dodd-Frank. Now, lawmakers will try to work out a compromise that both chamberscan support.
In all, 16 Democrats and one independent senator voted with Republicans on the bill, a rarity for major legislation.
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