House Panel’s Dodd-Frank Tweaks Won't Add Up to ‘a Big Number’By
Financial Services Committee is weighing a package of changes
Piecemeal approach suggests big overhaul isn’t coming soon
President Donald Trump promised to do “a big number” on the Dodd-Frank Act. But a slate of bills House Republicans will take up Wednesday shows how difficult it is to get anything big through Congress these days.
The House Financial Services Committee is set to consider almost two dozen legislative proposals targeting financial rules. Instead of gutting the Volcker Rule, shutting down the Consumer Financial Protection Bureau or enacting other sweeping overhauls, most would make incremental tweaks.
The piecemeal approach of advancing one-off bills is the latest sign that Republicans don’t expect to dismantle rules stemming from the 2008 financial crisis anytime soon, lumping it in with other deferred priorities such as repealing Obamacare and overhauling tax policy.
“Everyone’s known all along that major financial regulation reform just wasn’t going to pass this Congress,” said J.W. Verret, a former congressional staffer who is a scholar at the Mercatus Center at George Mason University. “Even bipartisan issues that are coming up this week, even if they do rack up big margins of support in the House, it doesn’t necessarily translate in the Senate.”
While most of the legislation the House is considering is limited in scope, specific companies and corners of Wall Street could benefit from enactment of certain items.
One measure under consideration would change the criteria for determining whether banks are considered systemically important, potentially freeing regional lenders such as Huntington Bancshares Inc. or firms like American Express Co. from some of the most stringent regulatory oversight.
Another bill would make it easier for heirs of wealthy individuals whose money is run by a family office to invest in hedge funds, private-equity firms and other potentially lucrative investments. And one proposal could bring custodial banks like State Street Corp. and Bank of New York Mellon Corp. a reprieve from some capital requirements.
Many of the bills are pieces of the Financial Choice Act, a sweeping Dodd-Frank overhaul that the House passed in June. Representative Jeb Hensarling, the Texas Republican who leads the Financial Services Committee, has said that he hopes the Senate will consider the Financial Choice Act in full, but that he will advance parts of it separately. Bills that get through the House on their own could be attached to a broader spending plan or another financial-regulation package later this year.
Thus far, the House-passed bill has gone nowhere in the Senate, where Republicans have a slim majority. Senator Mike Crapo, the Idaho Republican who leads the Banking Committee, has said he is working with the panel’s Democrats, led by Senator Sherrod Brown of Ohio, to come up with a bipartisan measure. That limits what’s possible, as Democrats have resisted making changes that would be seen as a gift to Wall Street.
Here’s an overview of some of the measures the Financial Services Committee will consider:
Representative Blaine Luetkemeyer, a Missouri Republican, has proposed changing how banks are determined to be systemically important, a label that subjects them to tougher oversight by the Federal Reserve. Currently, the label applies to all banks with assets greater than $50 billion. Luetkemeyer’s bill would replace that threshold with one that considers factors other than asset size. Regional lenders such as Huntington Bancshares, KeyCorp and Regions Financial Corp. would stand a good chance of benefiting.
While Luetkemeyer’s bill isn’t a sure winner, tweaking the threshold for regional banks is an idea that has bipartisan support in the Senate. Senators David Perdue, a Georgia Republican, and Claire McCaskill, a Missouri Democrat, have proposed similar legislation.
Representative Carolyn Maloney, a New York Democrat who represents Manhattan’s Upper East Side, wants to make it easier for wealthy people and their heirs to invest inherited money in a wider variety of assets. Her bill would clarify that all clients of a family office, including individuals as well as trusts and charitable organizations, are so-called accredited investors, a status that allows them to put money into more exclusive holdings such as hedge funds.
Custodial banks such as State Street and Bank of New York Mellon could benefit if Congress passes a bill that would exempt some of their funds from capital requirements. Certain funds held by such banks wouldn’t count towards the firm’s supplementary leverage ratio, under a bill sponsored by Representative Keith Rothfus, a Pennsylvania Republican.
Representative Ann Wagner, a Missouri Republican, has proposed a bill that would repeal the Labor Department’s fiduciary rule, an Obama-era measure that requires brokers who offer retirement advice to put customers’ interests ahead of their own. The Trump administration has already delayed aspects of the rule’s implementation and the Securities and Exchange Commission is looking into approving its own regulation.