Bank industry searches for wins under Trump

United States banks and financial services companies are digging in for a long fight to curtail the Dodd-Frank Act, the Obama-era banking regulation bill.

Republicans lack the votes in the Senate to fulfill President Trump’s campaign promise to “dismantle” Dodd-Frank and face pushback from Obama-era officials who still hold key regulatory roles.

That’s forced the industry to seek smaller wins while the Trump administration labors to reshape and slim down federal banking and trading regulations.

{mosads}“[The Trump administration] came in and they were completely naive to the workings in Washington,” said a former senior Senate aide who is now on K Street. “I think the president thought whatever he says goes, not realizing the tremendous power of the folks on Capitol Hill.”

Trump-appointed financial regulators have made some moves to ease Dodd-Frank rules, and it’s possible that lawmakers will pass bipartisan legislation this year to ease the regulatory burden on mid-sized banks.

But financial services lobbyists and Capitol Hill aides say more significant progress on Dodd-Frank could reach well beyond next year’s midterm elections.

“Companies are starting to tamp down their expectations on what really can get done,” said the former Senate aide.  

When Republican leaders set their 2017 agenda in January, they aimed to enact a major bill to roll back Dodd-Frank sometime in the fall. The GOP planned to have repealed and replaced the Affordable Care Act and passed a major tax overhaul soon after this summer.

Trump also promised during his campaign to take apart Dodd-Frank, even though the finance industry said the law needed to be adjusted, not destroyed.

Few on Capitol Hill or K Street expect Republicans to pass a revamp of Dodd-Frank. The CHOICE Act, a sweeping bill to rein in much of the law, passed the House in June but isn’t expected to see Senate action. 

But the industry is still optimistic that there will be significant regulatory changes from the administration now that Trump officials are settling into key roles.

The Financial Stability Oversight Council, for example, recently stripped AIG of its “systemically important financial institution” (SIFI) designation. That decision from the interagency group of regulators freed the insurance company from much of the enhanced oversight its messy 2008 collapse
inspired.

AIG had downsized its business and ended several investment divisions responsible for the risky trades that contributed to the 2008 crisis. Prudential is now the only other nonbank with the SIFI designation, and it praised the council’s move toward focusing on larger, riskier firms.

Meanwhile, lawmakers and regulators from both parties are supportive of changing Dodd-Frank rules that automatically subject banks and financial firms with more than $50 billion in assets to stricter
oversight.

The House Financial Services Committee last week approved a bill that would ease the regulation of some banks that have more than $50 billion in assets. To qualify, a bank would have to be focused on regional business and not pose a risk to the global financial system if it collapsed. Sens. David Perdue (R-Ga.) and Claire McCaskill (D-Mo.) introduced a companion bill to the Senate Banking Committee, where much of the bipartisan dealmaking could happen.  

Four moderate Banking panel Democrats asked Chairman Mike Crapo (R-Idaho) earlier this month to put his weight behind efforts “to rationalize our financial regulatory regime.”

Sens. Joe Donnelly (Ind.), Heidi Heitkamp (N.D.), Jon Tester (Mont.) and Mark Warner (Va.) asked Crapo in a Oct. 9 letter to “reach an agreement on a regulatory reform package that can come before the committee” within weeks.

Crapo and the Senate Banking Committee’s ranking Democrat, Sherrod Brown (Ohio), both expressed support for a bipartisan regulatory reform bill, and committee members have agreed on key provisions of a potential deal. Those include clarifying the Volcker rule banning banks from making risky trades with their own capital, exempting mid-size regional and community banks from stricter government oversight and reducing the frequency of regulator stress tests.

White House chief economic adviser Gary Cohn also said Monday that lawmakers are close to a deal to raise the $50 billion SIFI threshold, though the White House’s primary focus is on passing a tax overhaul by the end of 2017.

Anthony Cimino, head of government relations for finance industry trade group Financial Services Roundtable, said he’s encouraged by the growing “recognition that the system can be better tailored to drive economic growth.”

The Treasury Department has released two reports on financial regulations mandated by an April executive order that called for a slew of changes meant to boost growth by limiting regulations.

Cimino said the reports reflected “a massive amount of stakeholder input” and boded well for “keeping the drumbeat going” on tailoring Dodd-Frank.