WASHINGTON — Following enactment of the Senate's regulatory relief bill in May, Congress is attempting to sprinkle in a handful more provisions to ease the industry's burden.
Bipartisan legislation the House passed Tuesday is primarily focused on capital formation: easing regulations on businesses looking to go public. But the package, which mostly includes noncontroversial bills that had already passed the full House or the Financial Services Committee, includes a few measures that will particularly please financial institutions.
“There’s some good, solid policy dealings, specifically with the capital markets, and I think that’s the emphasis,” said Rep. Bill Huizenga, R-Mich., who chairs a subcommittee on capital markets. “But we also have a couple of other things that I think are important.”
The bill, which the House passed 406 to 4, would extend the period between when banks submit living wills, delay a risk-based capital rule for credit unions and exempt nonbank financial institutions from mandatory stress test requirements, among other measures.
The package is considered the third iteration of the Obama administration’s Jumpstart Our Business Startups Act, or JOBS Act 3.0, and is a rare show of compromise between House Financial Services Committee Chairman Jeb Hensarling, R-Texas, and ranking member Maxine Waters, D-Calif.
The legislation is largely intended to better enable small businesses to access the capital markets.
The capital-formation struggles for new companies "is a bad trend in America," Hensarling said in a Tuesday morning briefing with reporters. Referring to the homemade nature of how many companies are launched, Hensarling said, “We still have too many garages filled with old cars" and "not enough startups."
In a statement, Waters said the legislation may even blunt some negative effects of deregulation, recognizing "the connection between a stable financial system and strong economic growth."
"As the Trump Administration looks to weaken financial reform rules set after the crisis, [the bill] takes steps to prevent those efforts," she said. "For example, our banking regulators would be directed to improve the calculation for bank capital held to offset risks in the options and derivatives markets so that riskier products are covered by higher levels of bank capital."
But despite overwhelming support in the House for the legislative package, it remains uncertain whether the Senate will pass the bill before the focus shifts almost exclusively to the midterm elections later this year.
Republicans and Democrats in the Senate are already sparring over the Trump administration's Supreme Court nomination of Brett Kavanaugh. The House and Senate also must agree on a spending bill by the end of September.
Meanwhile, support for the bill in the Senate among Democrats may also be less of a sure thing. Moderates may worry about blowback from the more progressive wing of the party after they were willing to support the banking regulatory relief bill that President Trump signed in May.
“Its path through the Senate ... is far murkier as moderate Senate Democrats appear unwilling to suffer friendly fire for carrying another regulatory relief bill to enactment and there is no indication that Senate Majority Leader [Mitch] McConnell is inclined to commit the necessary floor time,” Isaac Boltansky, director of policy research at Compass Point Research & Trading, said in a research note. “We believe the House will clear the JOBS Act 3.0 package this week, but its core components will need to be carried to enactment in an alternative must-pass legislative vehicle.”
After the House vote, McConnell said in a statement that "senators will continue their ongoing bipartisan discussions as we work towards a vote in the coming months.”
Sen. Heidi Heitkamp, D-N.D., a moderate on the Banking Committee and a key backer of the Senate's reg relief bill, praised the bipartisan nature of the House bill.
“It’s encouraging to see an overwhelming bipartisan package of financial reform bills come out of the House, and I intend to fully review it,” Heitkamp said in a statement.
Hensarling said he had a firm commitment from the Senate that it will put the package on the floor this year. He noted even that the House bill amends legislation that had originated in the Senate.
“We are taking ... [a Senate] bill, a bill of [Republican Sen. Pat] Toomey’s, so again we only need a simple majority to proceed to the floor,” Hensarling said.
He also noted he had been in contact with Senate Banking Committee Chairman Mike Crapo regarding the bill.
"I have had numerous conversations with my Senate counterpart, Chairman Crapo, about this, he is anxious to receive it, as you know we have a commitment that this will receive a vote," Hensarling said. "It will be taken up on the Senate floor; there is not a guarantee of the result, but there is a guarantee of it being taken up on the floor and a guarantee of an actual vote."
Included among the 32 measures in the House bill is one that passed the House by 414-0 that would set a two-year schedule for large banks to submit living wills. Under the Dodd-Frank Act, banks have generally had to submit the resolutions plans annually.
The bill also requires the Federal Reserve and the Federal Deposit Insurance Corp. to provide feedback within six months after a living-will submission by a bank holding company and to publicly disclose the assessment framework used to review the adequacy of resolution plans.
The legislation also includes a provision hailed by credit unions that would set a two-year delay for the National Credit Union Administration’s risk-based capital rule, which establishes a new method for measuring whether a credit union is adequately capitalized. That bill has not yet been voted on by the Financial Services Committee or the full House.
Nonbank financial institutions not primarily regulated by either a federal banking agency or the Federal Housing Finance Agency would also be exempt from mandatory, company-run stress testing requirements in a bill that passed the House 395-19.
The bill also establishes criminal penalties for the unauthorized disclosure of living-will and stress test determinations and other individually identifiable information by federal officials through a provision that passed the House 392-2.
The legislation aims to help certain consumers build a credit history through a provision that allows positive information related to telecommunications and utility payments to be reported to credit reporting agencies. That bill, sponsored by Rep. Keith Ellison, D-Minn., passed the House by a voice vote.