President Donald Trump has said he wants to do “a big number” on the Obama-era financial rules devised after the Great Recession, and House Republicans were poised to fulfill that goal Thursday.
The GOP-controlled House was on track to vote for legislation that would wipe away much of the financial law created to head off economic meltdowns like the one that caused millions of Americans to lose their jobs and homes during the 2008-09 collapse.
Republicans say many requirements imposed under what is known as the Dodd-Frank Act, named after its Democratic sponsors, have harmed economic growth by making it harder for consumers and businesses to get loans.
“Let’s lower the cost of financial services for everyday consumers. Let’s bring an end to the anti-growth policies of the last eight years and move into a much brighter, more prosperous future for everyone,” said Rep. Keith Rothfus, R-Pa.
Added House Speaker Paul Ryan, R-Wis.: “We need relief.”
Democrats overwhelmingly opposed to the Republican bill, which faces major obstacles in the Senate. They say the law has meant financial security to millions of people and that undoing it would encourage the kind of risky lending practices that invites future economic shocks.
They also oppose efforts to sharply curtail a consumer protection agency’s power to pursue companies that it determines have participated in unfair or deceptive practices in their financial products and services. The Consumer Financial Protection Bureau has returned $29 billion to 12 million consumers who were victims of deceptive marketing, discriminatory lending or other financial wrongdoing.
“The sole purpose of the CFPB’s existence is to ensure that bank loans, mortgages and credit cards are fair, affordable, understandable and transparent, and that’s exactly what it’s doing,” said Rep. David Cicilline, D-R.I. “Republicans want nothing more than to kill it.”
The Republican-led overhaul of Dodd-Frank was crafted by Rep. Jeb Hensarling of Texas, chairman of the House Financial Services Committee. His bill would target the heart of the law’s restrictions on banks by offering a trade-off: Banks could qualify for most of the regulatory relief in the bill so long as they meet a strict requirement for building capital to cover unexpected big losses.
The bill would repeal a rule that bans banks from engaging in propriety trading or forming certain relationships with private equity funds. It would roll back a proposed rule that investment advisers put their clients’ interests ahead of their own.
Also, financial regulators would lose the power to dismantle a failing financial firm and sell off the pieces if they decided its collapse could endanger the system. Instead, the bill would let banks fall under an expanded part of bankruptcy law.
The Federal Reserve has described the U.S. banking system as much more robust and resilient than it was before the financial crisis. Stronger capital requirements have improved their capacity to absorb economic shocks. But in the push to overhaul Dodd-Frank, Republicans contend the biggest banks have only gotten bigger while local banks and credit unions are dwindling.
The Fed counted 5,031 commercial banks as of May 1. That’s down from 6,750 in the third quarter of 2010, shortly after the financial overhaul. The consolidation trend, however, far preceded that law. In the first quarter of 1984, there were 14,400 commercial banks in the U.S.