WASHINGTON—A plan by House Financial Services Committee Chairman Jeb Hensarling to dismantle and replace the Dodd-Frank Act is already meeting with opposition, while one analysis has also suggested that it’s unlikely the biggest banks will rally behind the proposal.
As CUToday.info reported here, Hensarling has described his yet-to-be-introduced Financial Choice Act as a “new legislative paradigm in banking and capital markets,” saying “Simply put, Dodd-Frank has failed.”
Hensarling indicated he also plans to meet with Republican presidential candidate Donald J. Trump, who has called for a repeal of Dodd-Frank.
Democrats are already lining up to object to the proposed overhaul. During a Senate Banking Committee meeting, Sen. Elizabeth Warren, the primary champion of the CFPB while she was in academia, called Hensarling’s proposal a “wet kiss for the Wall Street banks.”
Similarly, Rep. Sherrod Brown (D-OH) issued a statement that the plan “underscores the collective amnesia of many in Congress and on Wall Street about how devastating the financial crisis was for an entire generation of working and middle-class Americans.”
The New York Times reported earlier this week that, contrary to what many might expect, those big Wall Street banks are unlikely to get behind some aspects of the Financial Choice Act. That’s because one of the central provisions of the Hensarling plan would allow the country’s biggest banks to exempt themselves from capital and liquidity requirements and other regulatory standards if they held enough capital to surpass a certain threshold.
Hensarling said that could mean “several hundred billion dollars in new equity” to benefit from the proposal.
The New York Times quoted analysts as saying the big banks, which have already spent tens of billions of dollars to comply with Dodd-Frank, “are unlikely to throw their weight behind it” for that reason.
The credit union trade groups have withheld much comment until the proposal is actually released, although both NAFCU and CUNA have indicated support for a panel or board to oversee the CFPB, rather than the current single director.
“NAFCU and our members greatly appreciate Chairman Hensarling’s thoughtful leadership in creating a plan to correct a regulatory pendulum that has swung too far,” said NAFCU CEO Dan Berger in a statement. “Lawmakers and regulators have widely recognized credit unions for their prudent business model and for not creating the crisis. Hensarling’s plan addresses a number of issues of great concern to credit unions. Specifically, we appreciate that his plan would repeal the federal price caps within the Durbin amendment. We expect a number of other NAFCU-backed regulatory relief measures to be included in the larger package, including requirements for regulators to better tailor rules to different sizes and types of institutions. We look forward to seeing the plan in greater detail.”
CUNA's chief advocacy officer, Ryan Donovan, said in response to the Hensarling proposal, "We appreciate Chairman Hensarling’s provisions that tackle some of the regulatory burdens shouldered by Main Street, community financial institutions--especially the consideration it gives to credit unions' supervisory concerns. CUNA also strongly supports the creation of a five-member panel to head the Consumer Financial Protection Bureau (CFPB) and believes the current sole-director structure at the CFPB jeopardizes the bureau’s foundation as an objective, neutral consumer protection agency.
"Credit unions didn't create the financial crisis but are impacted daily, nonetheless, by excessive regulation,” added Donovan. “Reducing unnecessary rules will free resources and enhance their ability to serve their members."
Among the provisions of the bill that CUNA said has its support are:
- Creating an independent examination ombudsman and independent examination appeals process, as well as examination standards for financial institutions. Based on the Financial Institutions Examination and Reform Act (H.R. 1941), which passed the House Financial Services Committee in July 2015.
- Prohibiting a federal banking agency from suggesting, requesting or ordering a depository institution to terminate specific account, or restrict it from a relationship with a specific consumer. Based on the Financial Consumer Protection Act of 2015 (H.R. 766), which passed the House in February.
- Allowing credit unions and other lenders to treat mortgages held in portfolio as Qualified Mortgages for purposes of the CFPB’s mortgage lending rules. Based on the Portfolio Lending and Mortgage Act (H.R. 1210), which passed the House in November 2015.
- Requiring federal regulators to take risk into account when promulgating regulations, based on the Taking Account of Institutions with Low Operation Risk Act (H.R. 2896), which passed the House Financial Services Committee in March.