The Dodd-Frank Act reforms that will soon be signed into law may be relatively modest — but messaging around the vote this week will be anything but.

The House is set to advance a Senate regulatory relief bill for community and regional banks in coming days, after months of debate. The legislation amounts to a significant victory for Republicans who have long sought to leave their mark on the 2010 crisis-era law. Yet while it includes a handful of provisions that may rightly concern progressive lawmakers, the bill leaves Dodd-Frank largely intact for the foreseeable future, falling well short of pledges to dismantle it.

Just don’t expect the rhetoric in Washington to reflect that nuanced reality. Already, top GOP officials — most notably Speaker Paul Ryan — have suggested that the bill is a “repeal” of Dodd-Frank, while progressive critics have warned that the package obliterates key safeguards for the financial system.

House Speaker Paul Ryan
Speaker Paul Ryan recently indicated the House was getting ready to "repeal and replace" Dodd-Frank, even as more modest reforms were being debated. Bloomberg News

“We’ve seen hyperbolic rhetoric from both sides, with Democrats claiming this will foster the next financial crisis and Republicans claiming this bill repeals Dodd-Frank — as is often the case, the truth is squarely in between,” said Isaac Boltansky, director of research at Compass Point Research & Trading.

While moderate Democrats who support the bill may offer more muted praise — emphasizing reforms for community bankers, whose support they’ve been seeking — those responses are likely to be drowned out by more vocal cheers and condemnation from conservatives and liberals alike.

Why does the spin from both sides make the bill appear more momentous than it really is?

To begin, the legislation marks the most significant changes to Dodd-Frank since its passage in 2010 — and it’s probably the last opportunity to overhaul the law for the time being, despite Republican efforts to advance another package in coming months.

President Trump vowed shortly after his election to “do a big number” on Dodd-Frank. While the substance of the bill doesn’t qualify, it’s the closest Republicans are going to come for right now. Spinning the bill as a repeal can help Trump and the GOP show the base that they’re keeping their campaign promises.

At the same time, liberals also benefit from exaggerating the impact of the reg relief bill, giving them an opportunity to portray Republicans and Trump as being captured by Wall Street interests, whether or not the bill does much to assist big banks.

Still, the strategy carries real risks on both sides of the aisle. Republicans risk overselling the impact of the regulatory reforms on lending and the broader economy. And if they claim to have already repealed Dodd-Frank, it’s hard to keep calling for further action against it.

Progressives, meanwhile, may wear out their base with overzealous warnings, potentially diminishing their power should a truly damaging financial reform bill come up for a vote in the future.

That won’t, of course, stop either side in the coming days. With the midterm elections just around the corner, it’s clear that now is not the time for nuance.

Bankshot is American Banker’s column for real-time analysis of today's news.

Victoria Finkle

Victoria Finkle

Victoria Finkle is editor of American Banker's op-ed blog, BankThink.

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