Senate passes bipartisan bill to roll back Dodd-Frank

The Senate on Wednesday passed a bipartisan measure to exempt dozens of banks from the Dodd-Frank Wall Street reform law enacted by former President Obama in 2010.

In a 67-31 vote, the Senate approved the most sweeping changes yet to Dodd-Frank that have earned bipartisan support. All present Republicans and 13 Democrats voted to approve the measure, sending it to the House.

The bill, sponsored by Senate Banking Committee Chairman Mike Crapo (R-Idaho), was the product of years of talks between Republicans and moderate Democrats concerned with the law’s impacts on small banks and credit unions.

Senators backing the bill argue it would free small banks from unnecessary rules and would help boost investment in struggling communities. Critics say the bill is a gift to Wall Street wrapped in false claims that it could rescue smaller lenders.

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The bill garnered the support of more than a dozen Senate Democrats, advancing it past a potential filibuster from liberals. The measure was long expected to pass the Senate, but triggered a fierce battle between the bill’s Democratic sponsors and progressive critics.

“I urge my colleagues to ask themselves — whose side are we on? The side of special interests and Wall Street, or taxpayers and homeowners and students and workers?” said Sen. Sherrod Brown (Ohio), the top Democrat on the Banking Committee, who opposed the bill.

The bill will now head to the House, where conservatives are demanding stronger curbs to Dodd-Frank before pledging their support.

The Crapo bill releases dozens of banks from tougher Federal Reserve oversight and frees smaller firms from regulations intended to prevent mortgage fraud and discrimination.

Banks with less than $250 billion in assets would no longer be subject to yearly Federal Reserve stress tests or higher capital requirements meant to ensure risky firms could weather a lending crisis. Those banks would also be exempt from submitting for Fed approval a “living will” that outlines how a company could be liquidated upon failure without causing a widespread meltdown.

The threshold for tighter Fed regulation is currently set at $50 billion, and the increase would free several major regional banks, including M&T, Citizens, SunTrust, BB&T, Fifth Third, and BMO Financial Corp.

The bill also exempts banks that extend 500 or fewer mortgages a year from reporting some home loan data to federal regulators and broadens the definition of qualified mortgages.

On Wednesday, senators voted by the same tally to end debate on the legislation and approve a set of changes to the bill, with many aimed at warding off liberal criticisms of the measure.

The amended measure clarifies that foreign banks with U.S. holdings less than $250 billion but above that level in foreign assets would still be subject to closer oversight. Provisions to force credit bureaus to offer free services for victims of hacks, protect military veterans from fraud, create new student loan backstops and mandate studies on various risks to the financial system were also added to the bill.

Senators filed more than 100 other amendments to the bill, but party leaders did not reach a deal to bring any of them up for a vote. Sponsors of the bill have resisted major changes over fears they could ruin the delicate bipartisan deal.

The bill’s future in the House is uncertain. The measure is seen by critics of Dodd-Frank as perhaps the last, best chance of a major legislative revision to the 2010 rules. Republicans are also eager to tout a major rollback of Obama-era rules as they head into the midterm elections.

But the Senate bill makes far fewer and weaker changes to Dodd-Frank than those sought by the House. Conservatives that spearheaded the House’s 2017 bill to rewrite Dodd-Frank want to add several measures intended to take a bigger chunk out of the law.

Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee, said Tuesday he’s not holding talks with key senators on making changes to the bill. He’s called on the Senate to add to their package a list of more than two dozen financial deregulation bills passed by his panel with bipartisan support.

Other House Republicans say they want to pursue changes with the Senate and form a conference committee to strike a deal, but seemed more open to the bipartisan bill.

K Street sources told The Hill that the measure faces growing opposition in the House, but Senate Democrats backing the bill have opposed reopening the bill after sending it to the lower chamber.

“There are some out there who say ‘this bill is going to look completely different when it comes back from the House.’ It may. If it does, than I guess we’re done,” Sen. Jon Tester (D-Mont.) said last week.

“I believe we have the White House’s support on it. And hopefully they’ll influence the House not to screw it up.”