WASHINGTON — After passing a comprehensive regulatory relief package last month, House lawmakers are lining up a series of smaller bills in the hopes it will help enable senators to enact at least some provisions soon.
The House Financial Services Committee held a hearing last week on a series of targeted relief bills, many of which enjoy bipartisan support, and one of which was already part of the larger legislation. The goal is to give Senate Banking Committee Chairman Mike Crapo, R-Idaho, more leeway when he tries to craft a relief measure.
“Crapo is going to pick and choose” which House bills he wants to include his own legislative package, said Ed Groshans, a policy analyst at Height Securities. “Either he is going to have a little bit of everything at the buffet or he is going to choose the ones he likes and put them in his bill and then he is going to get that bill in the Senate.”
Banking regulators appointed by the Obama administration have also given wary Democrats reason to support some of these efforts. During hearings last week, Federal Reserve Board Chair Janet Yellen endorsed simpler capital requirements for community banks, exempting smaller institutions from the Volcker Rule and changing the test used to determine if a bank is systemically risky.
Yet the question remains whether Democrats — who are still needed to win the 60 votes necessary for most pieces of legislation in the Senate — are ultimately willing to support any reform effort. Their primary fear is that Republicans may add other bills to any reform package that would assist larger institutions, not small banks and credit unions. If that happens, Democrats may walk away from the reform effort.
“Democrats are not in the mood to give Republicans anything,” said Ed Mills, a policy analyst at FBR Capital Markets. “They are willing to support things that they otherwise would support and if that aligns with a bill that is otherwise supported with Republicans, that bill passes. If it’s a bill that comes down to negotiations, it will likely end with no bill passing.”
It’s a situation that remains frustrating for bank lobbyists. Both political parties agree on some specifics of reform, yet the overall effort remains in jeopardy.
“It is clear we can get something done," Groshans said. "The issue is, what is the item that tips the scale from getting something done to getting nothing done?”
Some Republicans, meanwhile, are pushing their colleagues to go around Democrats entirely. House Financial Services Committee Jeb Hensarling said last week that Republicans could use the reconciliation process — which requires only 50 votes to pass a measure (with support by Vice President Mike Pence) — to enact some of the changes included in his comprehensive bill, called the Financial Choice Act. The GOP is already using reconciliation to attempt to pass healthcare and tax reform bills.
“There are provisions in the Financial Choice act that can be executed through the reconciliation process,” Hensarling said.
Yet there are limits on what could be passed that way. The biggest changes appear to be provisions that would defund the Consumer Financial Protection Bureau and scrap the Federal Deposit Insurance Corp.’s ability to seize and unwind failing banks.
But whether Republicans can go that route is uncertain.
“Anything that is going to take away from the ability of Congress from getting tax reform passed is going to fall off the shelf,” said Groshans, who also pointed to GOP troubles repealing the Affordable Care Act despite making it a campaign pillar. “So far … the Republicans are having trouble corralling their own folks for bills that they only need 51% of the votes, whether it is the House or the Senate.”
Even if that effort falls short, there are hopes that Trump administration appointees can enact reform at the regulatory level.
“With this White House,” a lot of Dodd-Frank changes can happen, said Hensarling, who also pointed to a recent list of recommendations for financial reform released by the Treasury last month.
“Our goals are similar,” Hensarling added. “In some respects the Treasury report is a blueprint for administrative action.”
But the Trump administration has been slow to get appointees installed at the top regulatory slots.
Most recently, FDIC Chairman-designate James Clinger asked the White House to withdraw his name from consideration because of a family matter.
Clinger was most recently Hensarling’s chief counsel, and having served four House Financial Services Committee chairmen. He appeared to be exceptionally qualified to start dismantling parts of the Dodd-Frank Act.
“He did have a unique background as a technocrat who truly knew the details of Dodd-Frank and where Republicans had issues, so leading the FDIC and coordinating some of those efforts would have been a pretty significant boost to the deregulatory agenda,” Mills said.
The Senate Banking Committee is also expected to move forward soon with the consideration of former OneWest executive Joseph Otting to be comptroller of the currency and former Wall Street lawyer Randal Quarles to be head of supervision at the Fed. Both could quickly start to deregulate the industry.
Republicans are also likely to try and use an appropriations bill in the fall to pass financial services policy riders. That legislation may very well be an omnibus package, stuffing a number of appropriations bills into big one, which often leaves little time for lawmakers to comb through every provision, making it ripe for influential lawmakers to slip in policy riders.
“We will use as many of the tools in the tool box to try and get as much of” the Choice Act passed “as we can,” Rep. Blaine Luetkemeyer, R-Mo., said in a recent interview.