Republicans and a block of moderate Democrats advanced on Tuesday significant proposed changes to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.
The Senate Banking Committee approved by a 16 to 7 vote a sweeping bill that would exempt dozens of banks from Dodd-Frank and loosen the rules imposed after the financial crisis on smaller firms.
Banking panel members from both parties sought to strike a bipartisan deal that would win the approval of both Chairman Mike Crapo (R-Idaho) and ranking member Sherrod Brown (Ohio).
After talks between Crapo and Brown collapsed in October, Crapo and the committee’s Republicans joined with nine Democrats to sponsor the Economic Growth, Regulatory Relief and Consumer Protection Act.
The bill would raise the asset threshold at which a bank holding company is considered a “systemically important financial institution” (SIFI) from $50 billion to $250 billion, and exempt all banks with less than $100 billion in assets from federal stress tests immediately.
Democrats sponsoring the bill include Banking Committee members Sens. Joe Donnelly (Ind.), Heidi Heitkamp (N.D.), Jon Tester (Mont.) and Mark Warner (Va.), along with Sens. Joe Manchin (W.Va.), Claire McCaskill (Mo.), Tim Kaine (Va.) and Gary Peters (Mich.), and independent Sen. Angus King (Maine). Sens. Tom Carper and Christopher Coons (D-Del.) said Tuesday they will also support the bill.
The deal has enough support to overcome a Democratic filibuster, and House Financial Services Committee Chairman Jeb Hensarling (R-Texas) said he’s willing to work with Crapo on a version that could pass the lower chamber.
But the bill is based on a fragile bipartisan balance. The coalition consists of Republicans eager to make whatever rollbacks they can to Dodd-Frank and moderate Democrats up running for reelection in states that supported President Trump in 2016.
Both groups say they’re eager to pare back what they call Dodd-Frank’s excessive burdens on smaller banks while proving to the fractured United States that productive compromise is possible.
A group of liberal Democrats opposed to the bill, including Brown, offered a slew of amendments that the sponsoring coalition voted down.
They offered amendments intended to relieve student loan defaulters, target relief for smaller banks, hold credit reporting agencies to tighter standards and bolster protections for military members abroad.
While some of the Democratic amendments to tighten Dodd-Frank’s oversight of major banks won’t see action, Crapo said several of the defeated amendments could be added to the bill later with changes that would keep the bill passable.
“The bill we are marking up today is the product of a thorough, robust process, and honest, bipartisan negotiations,” Crapo said.
“All of the sponsors have worked in good faith to include provisions from those who have offered them, including those who do not support the bill. And we will continue to do so after this markup.”
Brown said he hoped he would have been able to strike a deal with Crapo, but that the bill rolls back too many critical Dodd-Frank rules that underpin financial stability. He also expressed concerns that Trump’s nominees to federal regulators would take advantage of looser rules and threaten the economy with lax oversight.
“I support providing some relief to small banks and credit unions, but I think this bill unwisely chooses to do so by rolling back protections for people from the very activities that led to the crisis,” Brown said.
“There’s nothing to help people with record-high levels of student loan debt; nothing to help those with underwater mortgages; and nothing to help workers who are struggling to get by.”
Liberals claimed the bill was little more than a wish list for bank lobbyists meant to boost a financial sector already reaping record profits.
Sen. Elizabeth Warren (D-Mass.) said she was “disturbed” that her colleagues would consider rolling back financial rules amid the series of scandals exposed at banks such as Wells Fargo.
She, along with Brown, Democratic Sens. Brian Schatz (Hawaii), Catherine Cortez Masto (Nev.) and Chris Van Hollen (Md.), Jack Reed (R.I.) and Bob Menendez (N.J.) opposed the bill and supported several failed Democratic amendments.
Moderate Democrats backing the bill fiercely defended the deal and the means through which it was negotiated. They insisted that the bill would provide meaningful regulatory relief for small, rural banks and credit unions that were facing record levels of consolidation.
“This is going to allow working families to get loans and buy homes,” said Tester, who is up for reelection in 2018 in a state Trump won handily.
“I guarantee you that without this bill the only people that we would be empowering are the big banks.”
Heitkamp, also facing a tight reelection next year, said: “There’s not everything that I would want if I could write this bill and force you all the vote for it.”
But “what people are going to see from this committee room is that this body can function,” Heitkamp added. “That’s something this country desperately needs.”