WASHINGTON — The House Financial Services Committee vote Tuesday on a sweeping regulatory relief bill featured a lot of sound and fury, but how much it truly signified was decidedly unclear.
The vote stretched throughout the day and into the evening, including more than two hours when the text of the 600-plus page bill was read out loud, and showcased sharp partisan divisions and occasionally colorful language. While it is ultimately expected to pass the panel along largely party lines, few expect it to stand a chance in the Senate.
“Every single soul in this room knows this bill won’t become law,” said Rep. Denny Heck, D-Wash.
Although President Trump called Tuesday for the Senate to eliminate filibuster rules that allow Democrats to block legislation, that idea was soundly rejected by Majority Leader Mitch McConnell and other Republicans. That means Democrats have more than enough votes to block any version of the House bill when it is likely to be approved by the full chamber later this year.
“The bill destroys Wall Street reform, guts the Consumer Financial Protection Bureau, and returns us to the financial system that allowed risky and predatory Wall Street practices and products to crash our economy,” said Rep. Maxine Waters, the lead Democrat on the House Financial Services Committee, summing up the view among members of her party that is widely shared by her counterparts in the Senate.
Rep. Carolyn Maloney, D-N.Y., went further and called the bill a "middle finger to consumers, regulators, investors and the market.”
To be sure, Democrats didn’t hate every part of the bill. Some argued that House Financial Services Committee Chairman Jeb Hensarling should break up the legislation into pieces, some of which could win wider support.
“Dodd-Frank is not holy text … it can be improved,” said Rep. Brad Sherman, D-Calif. “Please split up this bill. You have buried a dozen improvements to Dodd-Frank that have majority support on both sides of the aisle.”
Sherman expressed concern that if those bills are included in the Financial Choice Act they could be tainted in the eyes of progressives who will push Democrats to oppose any part of the bill.
“As a political matter, there will be substantial pressure on members of this committee to vote against bills they previously supported,” Sherman said.
Yet the potential compromises appear small in scope, far less ambitious than what Hensarling is attempting. His bill would allow banks that agree to hold 10% leverage ratio an off-ramp for many regulations, including the complex Basel III capital and liquidity regime. It would also put the CFPB on appropriations and repeal the Durbin amendment debit interchange fee caps, among other things. None of those items are likely to garner much bipartisan support.
Instead, the provisions most likely to find broader support are targeted ones that would expand the definition of qualified mortgages to include loans in portfolio and make changes to the definition of high-cost mortgages for manufactured housing.
“Dodd-Frank made it almost impossible for banks to lend to anyone who is just trying to buy a mobile home to get in and out of the rain,” said Rep. Steve Pearce, R-N.M.
Sherman noted in a hearing last week that a bill sponsored by Rep. Andy Barr, R-Ky., that would address the manufactured housing mortgage issue would be able to pass the committee on its own. Rep. Bill Huizenga, R-Mich., has also introduced the bill along with Democrats that would change the mortgage points and fees calculation under the Truth in Lending Act.
Democrats argued Tuesday that a deal could be cut on these and other items if Hensarling agreed to work on a bipartisan bill.
“If our ranking member sat down with the chair, they could fix this today and we would vote on it,” said Rep. Emanuel Cleaver, D-Mo. “Community banks are hurting and we could fix it today. We ought to do is break that bill down to one bill and fix community banks.”
“This poisonous political partisanship that is us … is it possible for us … to settle on a single community bank bill that we can support … and demonstrate that we can do something?” added Cleaver.
However, Hensarling noted that the committee passed almost three dozen bills in the last Congress that became law, and that “not all bills are bipartisan.”
“We might not find” common ground “in this particular markup,” Hensarling said. But it does not mean there won’t be opportunities to work on another bill down the road, he said.
Cleaver said the bill Hensarling was putting forward Tuesday went too far in deregulating the financial services industry and was much more than a bill that would help community banks.
Republicans disagreed with that premise, however.
“This is not about deregulation; this is about rightsizing our regulatory systems,” said Rep. French Hill, R-Ark.
Democrats also questioned the purpose of putting forward the bill and the notion that regulation is slowing economic growth.
“The entire argument is that economy is not doing well enough … and it is because of Dodd-Frank … and in my opinion put the consumer and the very financial services industry at risk through deregulation because of an utterly unproven premise,” said Rep. Jim Himes, D-Conn.
Barr said that, from Himes’ perch the economy might be doing well, but in rural districts credit availability is strained because the community banks that serve them are drying up under the weight of overregulation.
“Lending in high-income congressional districts where Wall Street services those folks might have a good economy," Barr said, "but small-bank lending in rural districts that is where you see that” slower growth.
Himes responded by calling for empirical evidence and said consolidation in the industry “has been going on for decades.”