‘Still a victory’: Why a House reg relief bill matters despite Senate opposition

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WASHINGTON — The House voted 233-186 along mostly party lines to pass the Financial Choice Act, a sweeping bill that would dismantle most of the Dodd-Frank law.

The bill was hailed by the White House and Republicans as making good on their pledge to repeal and replace Dodd-Frank, but it is highly unlikely to clear the Senate given Democratic opposition.

Yet clearing the bill through one chamber has both practical and symbolic value, proving House Republicans are united in their rollback of financial regulations and giving baseline legislative language that the Senate might select in a more modest legislative package.

“It’s still a victory,” said Rep. Warren Davidson, R-Ohio. “We’d love 60-plus senators to say, ‘You guys are dead on, we love it,’ and the next week the president’s signing it. Next best thing? We’ll take the closest to that we can get.”

They may not be able to get much. Senate Banking Committee leaders are discussing individual provisions of the Choice Act, including looking at asset thresholds that trigger more supervisory standards and exemptions for small institutions from the Volcker Rule.

That is a far cry from most of the Choice Act, which touches on virtually every part of the financial system. The bill’s central element is an “off-ramp” that allows banks that have an average leverage ratio of at least 10% to opt out of various Dodd-Frank regulations — particularly capital and liquidity requirements.

There are other pieces of the Financial Choice Act that could become law. The 600-page bill is composed of many other narrow measures that have already passed the House panel, some of which have bipartisan support.

Rep. Brad Sherman, D-Calif., has identified a dozen of them that pertain to mortgage and business credit, among other things, and has called for Financial Services Committee Chairman Jeb Hensarling to separate those provisions which could pass in a bipartisan fashion.

Yet many of the Choice Act’s provisions are controversial. Chief among them is a dramatic restructuring of the Consumer Financial Protection Bureau, including an elimination of its supervision and rule writing authority, a limitation of its ability to police unfair and abusive acts and eliminating the bureau’s independent funding via the Federal Reserve. The bill would also rename the bureau the Consumer Law Enforcement Agency and give it a dual mandate to include increasing access to credit and financial products rather than only ensuring consumer safety.

The CFPB provisions in particular stand little chance in the Senate, where Democrats have been united against major changes to the agency. Republicans in that chamber could attempt to defund the CFPB through the reconciliation process, which only requires a majority vote, but doing so carries political risks and may create practical problems for financial institutions.

Democrats and progressives have been able to rally behind the CFPB, which remains politically popular even in polls taken by conservatives.

House Speaker Paul Ryan, R-Wis., said on the House floor Thursday afternoon that the bill will come to the aid of small banks reeling from the regulatory burden imposed by Dodd-Frank, which will spur new investment all across the country.

“The Choice Act reins in Dodd-Frank and delivers the regulatory relief these banks so desperately need,” Ryan said. “This will change our communities because these small banks are the lifeblood of our Main Streets.”

But Democrats assailed the bill as a giveaway to the financial industry, focusing specifically on the CFPB provisions.

“Today, House Republicans are pushing a dangerous Wall Street-first bill that would drag us back to the days of the Great Recession,” the House minority leader, Nancy Pelosi, said during a press conference Thursday afternoon. “This is the wrong Choice Act.”

Overall, the Congressional Budget Office estimates that the House bill would reduce the deficit by nearly $25 billion, partly by changing CFPB’s funding but more substantially by eliminating the Federal Deposit Insurance Corp.’s ability to use a fund to stabilize a large, insolvent bank holding company and gradually wind it down.

The orderly liquidation authority is part of a separate investigation by the Trump administration to determine its efficacy, with many anticipating that Treasury Secretary Steven Mnuchin will endorse efforts to eliminate those powers. Whether that effort can win enough Senate support is uncertain, however.

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Dodd-Frank Regulatory relief Regulatory reform Paul Ryan CFPB