Congress is poised to pass Dodd-Frank rollback for smaller banks

Congress is poised to pass Dodd-Frank rollback for smaller banks

Supporters of the bill say Dodd-Frank was too blunt an instrument in response to the financial crisis, hurting smaller lenders that played no role in the debacle.

But the GOP chairman of the House Financial Services Committee still can't help but look longingly at some criticism of the measure.

House leaders voted on the compromise bill, which had support from moderate Senate Democrats, in exchange for a promise to vote on later this year on a broader set of House-passed regulatory rollbacks.

The rollback is widely expected to pass, as not only do Republicans have the majority of Senate seats, but some Democrats are in support of the roll back.

Perhaps more intriguing was the number of Democrats who voted for the package.

Ahead of the House vote, House Democratic leader Nancy Pelosi of California and California's Rep. Maxine Waters, the top Democrat on the House Financial Services Committee, urged their colleagues not to vote in favor of the bill. "We must not allow the GOP Congress to drag us back to the same lack of oversight that ignited the Great Recession".

Despite the opposition from leadership, more than 30 Democrats voted for the bill.

SIFI banks are subject to increased regulation, including the need to undergo the Federal Reserve's stress tests that model the banks' ability to weather financial and economic downturns without causing a threat to the larger economy.

These regulations can make it harder for a bank to effectively lend and reduce profitability.

One core part of the bill would increase the amount in assets a bank needs to hold in order to be considered a Systemically Important Financial Institution, or a SIFI.

This is significant for larger regional banks like SunTrust, BB&T, and Fifth Third Bank. They point to increases in banks' lending and profits since Dodd-Frank's enactment in 2010 as debunking the assertion that excessive regulation of the banking industry is stifling growth. Under Dodd-Frank, banks with $50 billion or more in assets are in that category and fall under the jurisdiction of the Financial Stability Oversight Council.

Banks with assets below $10 billion would be subject to simplified regulations. There are fewer gains for Wall Street banks and investment firms, which will have to rely on regulators appointed by Trump to dial back hated constraints such as the Volcker Rule ban on proprietary trading.

While the legislation offers little for the very largest banks, the Trump administration has already been working through the regulatory system to make things easier for them.

The legislation also exempts certain banks and credit unions from requirements to report some mortgage loan data.

The House was preparing to vote Tuesday on a bill that would free thousands of small and medium-sized banks from strict rules meant to prevent another financial meltdown, one of the biggest steps to unwind the 2010 Dodd-Frank banking regulation law. "The opponents say that its going to produce some sort of Mad Max-like hell-scape of predatory misdeeds. Obviously the reality is far more nuanced". "To call it a bill for community banks and credit unions is wrong".

The measure will also loosen regulations for mortgage lenders and change the rules for student loan defaults.

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