Overnight Finance: Senate passes bill to rollback Dodd-Frank | Trump names Kudlow to replace Cohn | Former Equifax exec charged with insider trading

Happy Wednesday and welcome back to Overnight Finance, where we’re pondering the future of the Senate’s bill to roll back Dodd-Frank. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.

See something I missed? Let me know at slane@digital-stage.thehill.com or tweet me @SylvanLane. And if you like your newsletter, you can subscribe to it here: http://bit.ly/1NxxW2N.

 

THE BIG DEAL: The Senate passed the most sweeping bipartisan changes to the Dodd-Frank Act on Wednesday, approving a measure from Senate Banking Committee Chairman Mike Crapo (R-Idaho) on 67-31 vote. All Republicans and more than a dozen Democrats voted to pass the bill, with liberal critics in opposition.

Senators backing the bill say it would free small banks from unnecessary rules and would help boost investment in struggling communities. Critics claim the bill is gift to Wall Street the masquerades as help for smaller lenders. I’ve got the full recap here.

 

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What the bill does: Banks with less than $250 billion in global assets would no longer be subject to yearly Fed 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 the 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.

 

Reactions

• “Passage of this bill is a big win for Main Street in rural America and our families, farmers, and small businesses.” — Sen. Heidi Heitkamp (D-N.D.)
• “This is not about taking care of bankers. This is not about taking care of credit unions. It is about taking care of the people they serve – their borrowers.” — Sen. Jerry Moran (R-Kansas).
• “We know there is more work to do on the congressional and regulatory front to more appropriately tailor banking regulations, but we are encouraged by the important progress in this legislation.” — Rob Nichols, president and CEO of the American Bankers Association.
• “[The bill] includes common-sense regulatory relief for our nation’s nearly 5,700 community banks while preserving vital consumer protections and effective regulatory supervision.” — Camden Fine, president of the Independent Community Bankers of America (ICBA).

 

• “We missed an opportunity to pass meaningful bipartisan legislation that would help community banks and provide real protections for consumers.” — Sen. Sherrod Brown (D-Ohio).
• “A bipartisan majority of senators has chosen to commemorate the 10th anniversary of the worst financial crisis since the Great Depression by handing big banks and their lobbyists deregulatory gifts…” — Lisa Donner, executive director of Americans for Financial Reform.
• “It takes our financial system in the wrong direction, and serves as a giveaway to banks that are already posting record profits.” — Rep. Maxine Waters (D-Calif.), ranking Democrat on the House Financial Services Committee.

 

What comes next: That’s a really good question. The bill now moves to the House, where Republicans are withholding support for now. House Republicans, especially on the Financial Services Committee, want the Senate bill to take a bigger chunk out of Dodd-Frank.

You might remember that last June, the House passed the CHOICE Act, a major rewrite of Dodd-Frank produced by the Financial Services Committee. That bill goes way further than the Senate package to reel in Dodd-Frank.

House Republicans want to form a conference committee with senators to work out a new deal between both chambers. Senate Democrats backing the bill say they don’t want to conference. They fear what the House will do to the bill and say they will pull their support if there are excessive changes.

Democrats had hoped the White House would pressure the House to pass the Senate bill, but the administration said after the vote that “The President looks forward to discussing any further revisions the House is interested in making, with the goal of bipartisan, pro-growth Dodd-Frank relief reaching his desk as soon as possible.”

One side will have to give, or the bill will die before it reaches President Trump.

 

LEADING THE DAY

From CNBC to the NEC: President Trump has picked CNBC contributor Larry Kudlow to be the next White House economic adviser.

Kudlow accepted the president’s offer in a telephone call on Monday night. He will replace Gary Cohn, who resigned after disagreeing with the president’s decision to impose steep tariffs on steel and aluminum imports.

The Hill’s Jonathan Easley explains the pick and why Kudlow’s past objection to tariffs didn’t bar him from the job:

“Like Cohn, Kudlow has also said he opposes tariffs. But the president suggested that Kudlow had warmed to the idea, at least as a negotiating tactic for trade agreements.

‘He’s come around to believing in tariffs,’ Trump said of Kudlow. ‘I’m renegotiating great deals. Without tariffs we wouldn’t do nearly as well.’

Kudlow, who is an opinion contributor for The Hill, said over the weekend that he’s not opposed to ‘targeted tariffs’ against China, calling Beijing a ‘key problem’ for the U.S.

The president has long railed against the Chinese for ‘ripping off’ the U.S. through currency manipulation and for flooding the U.S. market with steel and other metals.
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Tax panel digs in on review of “extenders”: Dozens of narrowly targeted tax breaks have been repeatedly renewed over the past several years, typically for one- and two-year periods. These provisions pertain to industries including renewable energy, motorsports and horse racing.

The House Ways and Means Committee on Wednesday began the process of evaluating tax breaks that expired at the end of 2017. The Hill’s Naomi Jagoda tells us about what’s on the line here.

 

SEC charges Theranos with ‘massive fraud,’ former Equifax exec with insider trading: It was a busy Wednesday at the Securities and Enforcement Commission.

The SEC charged Elizabeth Holmes, founder and CEO of the embattled blood testing startup company Theranos, with “massive fraud,” citing an “elaborate, years-long” scheme “in which they exaggerated or made false statements about the company’s technology, business, and financial performance.” The Hill’s Nathaniel Weixel walks us through the case here.

Earlier in the day, the SEC charged a former Equifax executive with insider trading after he allegedly sold close to $1 million in company stock in August, just before the credit bureau announced a major hack. I’ll tell you about what he allegedly did, and the bizarre way it reportedly happened, right here.

 

MARKET CHECK: Dismal. Wall Street extended its rough week through Wednesday, with all three major U.S. indexes closing down. The Dow Jones industrial average sunk 1 percent on the day, while the Standard and Poor’s 500 and Nasdaq fell 0.57 and 0.19 percent each.

 

GOOD TO KNOW 

• European Union leaders urged President Trump to restart trade talks they say would help solve differences over tariffs while strengthening economic ties.

• Senate Republicans appeared skeptical that a deal on a key Obama-era immigration program will end up in a mammoth government funding bill despite reports of an 11th-hour push by the White House.

• House Republicans could soon release a proposal for a second phase of sweeping tax cuts.

• Google will ban all ads related to cryptocurrency.

• A bipartisan group of House members released a bill that would replace the director of the controversial Consumer Financial Protection Bureau (CFPB) with a five-person commission.

• A group backed by GOP mega-donors Charles and David Koch is launching new ads focused on the Republican tax law in two states where vulnerable Democratic senators are seeking reelection.

 

GOING DEEPER: A variety of trade and interest groups are pressing for fixes to provisions of the GOP tax-cut law they consider honest mistakes, drafting errors and misguided ideas. Naomi Jagoda takes us inside the fight.

 

ODDS AND ENDS

• Toys R Us will sell or close all 800 of its stores in the US, The Washington Post reported Wednesday.

• A group of GOP lawmakers from New York and New Jersey met with Speaker Ryan (R-Wis.) on Wednesday to promote a multibillion-dollar rail project the Trump administration has disowned in recent months.