Senate votes to advance changes to Dodd-Frank rollback

The Senate voted Monday to advance a set of updates to a bipartisan bill to loosen strict banking rules that are part of the Dodd–Frank Wall Street Reform and Consumer Protection Act.

The Senate voted 66 to 30 to end debate on an amendment from the bill’s sponsors meant to mute liberal criticisms of the measure and earn support from skeptical House conservatives.

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Both the amendment and underlying bill are expected to pass the Senate with broad bipartisan support. Last week’s failed negotiations over other amendments to the bill delayed votes to Monday.

The bill from Senate Banking Committee Chairman Mike Crapo (R-Idaho) includes the most sweeping changes to Dodd–Frank with bipartisan support. Thirteen Democratic senators support the bill, blocking a filibuster from liberal colleagues, despite fierce criticism from the left.

“It keeps consumer protections in place and increases protections for those who fall on hard times or become victims of fraud,” Crapo said in a Monday video.

Liberal Democrats, including many seen as likely presidential candidates, have railed against the bill as a gift to Wall Street hidden under claims of relief for community banks.

“The new amendment does not do a single thing to address these legitimate criticisms,” Sen. Elizabeth Warren (D-Mass.) said Monday. “It’s a bunch of fig leafs designed to let supporters of the bill act like they’ve addressed these legitimate criticisms.”

The bipartisan coalition backing the bill insists it’s a measured, targeted approach to help the most vulnerable financial institutions serve areas with lagging economies.

The amendment the Senate will vote on Monday clarifies that foreign banks are excluded from perhaps the most significant part of the bill.

Banks with less than $250 billion in assets would be exempted from tougher Federal Reserve oversight, a level set at $50 billion under Dodd–Frank. Firms below the new threshold would no longer face yearly Fed stress tests or higher capital requirements, and would not have to submit a plan for the bank to be taken apart upon failure without causing a crisis.

The amendment 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.

The changes also target a provision loosening a rule on the ratio of capital to debt a bank must hold, one of the few provisions touching the biggest Wall Street firms.

The amendment clarifies that only custodial banks, not consumer and investment firms, would benefit from the new calculation. Those include Bank of New York Mellon and State Street, which exclusively safeguard deposits and manage assets. The amendment is meant to exclude firms JPMorgan Chase, Goldman Sachs and Citibank.

Despite recent bipartisan support for adjusting that buffer, called the supplemental leverage ratio, the Senate bill’s liberal critics have objected. They say the custodial banks don’t need help, while consumer and investment banks could sue over being excluded from the changes and force the Fed to deregulate them.

Democrats have also objected to provisions in the amendment that would mandate credit reporting companies to offer free services to victims of hacks. Liberals say a protection in the amendment against lawsuits for credit bureaus offering free monitoring is unacceptable and harms consumers.

The amendment also adds measures to protect military veterans from fraud and create new student loan backstops and mandate studies on various risks to the financial system.

While the bill is safe to clear the Senate, House conservatives are pushing for more influence over the package before promising their support.

Crapo’s substitute amendment includes eight uncontroversial bills from the House Financial Services Committee, most of which seek to help business owners raise capital by easing securities laws.

Even so, House Financial Services Committee Chairman Jeb Hensarling (R-Texas) said Thursday that the manager’s amendment didn’t include enough to win his vote.

The committee circulated a list of 29 bills with bipartisan support that Hensarling wants considered in a compromise package.

Updated at 6:17 p.m.