Rollback of Crisis-Era Banking Rules Clears Senate

WASHINGTON—Congress moved a step closer to relaxing the wave of crisis-era restrictions placed on the banking industry on Wednesday, with Senate approval of a bipartisan plan to ease rules for small and midsize banks.

The bill, which has a good chance of becoming law, would be the most significant revamp of financial rules since Republicans took control of government last year and the Trump admnistration set out broad goals to reduce business regulations.

Approved on a 67-31 vote, it seeks to cut red tape and relieve lenders from some of the most onerous rules put in place after the financial crisis, including restrictions meant to limit the damage firms could cause to the economy. Seventeen centrists from the Democratic caucus supported the bill, bucking the party’s liberals who eight years ago approved a sweeping legislative package meant to prevent another financial meltdown.

Supporters say the bill will spur more lending and boost the U.S. economy. “This bill has received widespread support for good reason: the cycle of lending and job creation has been stifled by onerous regulation,” Senate Banking Committee Chairman

Mike Crapo

(R., Idaho), the bill’s main author, said on the floor ahead of the vote.

Opponents say it will bring back unnecessary risks to the nation’s financial system and harm consumers. They noted the bill passed on the 10-year anniversary of the collapse of Bear Stearns Cos, a key development in the 2008 crisis.

The legislation now moves to the House, where top Republicans say they want to add provisions to the bill. Adding to it could upset the deal between Mr. Crapo and a group of moderate Democrats, possibly delaying final passage for weeks or months, or derailing the legislation altogether, Senate aides said.

Wednesday’s bill marks one of the Senate’s few bipartisan accomplishments in recent memory.

Last year, the biggest legislative battles over health care and taxes both relied on a procedural shortcut tied to the budget process. That allowed Republicans to pass a tax overhaul with just a simple majority in the Senate, although they fell short of that on health care. Most legislation needs 60 votes to clear procedural hurdles in the Senate.

A core piece of the Senate bill could cut to 12 from 38 the number of banks subject to heightened Federal Reserve oversight by raising a key regulatory threshold to $250 billion in assets from the current $50 billion. The Fed has already eased stress tests for midsize banks, but Dodd-Frank limits the Fed’s reach because it spells out that all banks above $50 billion in assets must face stricter rules. By effectively raising that threshold to $250 billion, the new legislation would give regulators more space to lighten the load.

The bill will also give the Fed some discretion to keep a closer eye on banks in the $100 billion to $250 billion range, depending on their perceived risk levels.

Another provision—a flashpoint in the debate over the bill—would exclude banks that originate fewer than 500 mortgages annually from having to report certain racial and income data on their mortgages, unless they perform poorly on tests of lending discrimination.

Critics charge the provision could make it tougher to police racial discrimination in lending, though supporters deny the charge. They point to a Fed Bank of Kansas City analysis that found only about 3.5% of total reportable data will be lost, while roughly 75% of banks will receive relief under the provision.

Stacey Tronson, the compliance officer for Cornerstone Bank, a North Dakota bank with 14 locations, said the compliance costs for the mortgage-reporting requirements alone have led other banks in her state to exit from the mortgage lending business altogether. “No small bank can continue to weather that,” she said.

Some House Republicans want to reconcile the Senate bill with the Choice Act, broader legislation to roll back the 2010 Dodd-Frank law that passed the House last year. It would relieve healthy banks of the bulk of Dodd-Frank in exchange for heightened capital requirements. Senate lawmakers and their aides say their bill already incorporates eight provisions from the House bill, which was opposed by all Democrats in that chamber. Any further changes to it could upend the bipartisan Senate deal, they say.

Liberal Democrats spent much of the legislative process challenging their centrist counterparts for backing the measure, illustrating ideological party splits in the party ahead of the 2018 and 2020 elections.

Opponents, led by lawmakers such as Sen. Elizabeth Warren (D., Mass.), said the bill would more risk into the financial system at a time when banks are enjoying strong profits. In an unusual move, Ms. Warren attacked her centrist counterparts by name in a fundraising email last week for having “sided with big banks.”

Centrist Democrats who helped author the bill—including Sens.

Heidi Heitkamp

(D., N.D.), Jon Tester (D., Mont.) and

Joe Donnelly

(D., Ind.)—say the legislation recalibrates a series of post-financial-crisis rules that have stifled smaller banks in their home states. All three of those senators are from states Mr. Trump won in 2016 and are facing tough re-election battles this year.

Write to Andrew Ackerman at [email protected]


Source link :

Author :

Publish date : 2018-03-14 22:45:33

share on: