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House passes Dodd-Frank overhaul

The U.S. House of Representatives passed a sweeping Republican-led bill on Thursday that would undo many of the regulatory provisions of the Dodd-Frank Act.

Known as the Financial CHOICE Act, the bill was passed along party lines. It reverses much of the regulatory framework for the financial industry set up during the Obama era with the enactment of Dodd-Frank, providing a way for large financial institutions to largely avoid the regulations. It also severely curtails the power of the Consumer Financial Protection Bureau (CFPB).

regsDemocrats strongly oppose the bill, dubbing it “the Wrong Choice Act.” Most analysts don’t expect it to move forward in the Senate, where 60 votes would be needed to break a filibuster. Republicans hold just a four-vote majority. Some provisions of the bill — such as proposed regularly relief measures for small banks and lenders — have a shot of gaining traction in a Senate version of the bill, however.

“There is a general sense [in both parties] that we should reduce the burden on smaller banks,” said Justin Schardin, a fellow at the Bipartisan Policy Center. “And to the extent that is a little bit in the Choice Act, that would be in the Senate package if that comes through.”

Schardin said that the Senate will likely take a stab at producing a comprehensive regulatory reform bill late in the year, but one that will likely differ significantly from the CHOICE Act and be scaled smaller. He said it was unlikely that changes to the CFPB would make it into any bill that would pass. The CHOICE act takes away much of the CFPB’s supervisory authority and independence, enabling the president to fire the CFPB director at will and make its budget subject to congressional oversight. The CFPB would be renamed the Consumer Law Enforcement Agency.

 “That is a highly sensitive issue with Democrats, and [the Republicans] need 60 votes. I just don’t see major changes to the bureau happening that way, particularly the structure,”  Schardin told Scotsman Guide News.

Dead on arrival? 

Much of the CHOICE Act could prove to be dead on arrival, though, particular what would be perceived to most benefit Wall Street.

“Most Americans want to punish Wall Street more,” Schardin said. “That is just a general feeling out there, so I think that Democrats feel like it is a winning issue for them. So, it is a little trickier than some other things.”

The core of the CHOICE act offers banks and financial institutions a way out of the Dodd-Frank supervisory regime and the Basel III risk-capital requirements if the banks opt to maintain higher capital levels. It also would abolish the Volcker rule, which prohibits banks from engaging in proprietary trading.

The bill purports to end “too-big-too-fail” by ending Title II of Dodd-Frank, which provided a pathway to resolve the failure of large financial institutions. It envisions restructuring the bankruptcy code to handle the failure of a bank or large nonbank institution that might threaten the economy.

The bill passed Thursday did not include a controversial provision supported by some banking trade groups to end the Durbin Amendment, which capped prices on debit-card interchanges.


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