Bill easing bank regulations heads to Trump

Jim Puzzanghera
Los Angeles Times

Washington – Bipartisan legislation focused on easing regulations for small and mid-sized banks passed the House on Tuesday and headed to President Trump for his expected signature.

Although the bill provides some significant relief for larger financial institutions, it falls short of the sweeping overhaul of the Dodd-Frank post-crisis reforms that Trump and most Republicans wanted.

The beneficiaries of most of the changes are community banks, which have complained that tougher regulations spurred by the 2008 financial crisis have unfairly made it more difficult for them to operate.

They’ll get a break from new mortgage rules if they make fewer than 500 of them a year, which supporters of the bill said will give Americans more options for home loans.

And banks with less than $10 billion in assets will be exempted from the regulatory burden of complying with the Volcker Rule, which prohibits institutions from trading for their own profit and limits ownership of risky investments.

“This is a way to keep community banks more viable and have less costs in rules and regulations and spend more of that time, money and resources on customers,” said Paul Merski, executive vice president for congressional relations at the Independent Community Bankers of America, a trade group that strongly backed the legislation.

The bill adds new consumer protections after Equifax Inc.’s massive data breach last year. Credit reporting companies would be required to let consumers freeze and unfreeze their files for free. Active-duty members of the military would also get free credit monitoring.

There’s wide bipartisan agreement on easing some regulations on small banks and expanding consumer protections. But the legislation also helps many larger banks, and that limited Democratic support.

The House voted 258 to 159, with 33 Democrats joining all but one Republican to pass the bill, called the Economic Growth, Regulatory Relief and Consumer Protection Act.

The Senate approved the legislation 67 to 31 in March with the support of several moderate Democrats who face reelection this fall in states thatTrump won by large margins.

Opponents focused on a key provision of the legislation that removes Dodd-Frank’s mandatory stricter oversight for about two dozen banks with assets of as much as $250 billion. Federal Reserve regulators also will get more flexibility in how they oversee large banks.

“This bill guts many of the protections Democrats put in place to reduce the risks of bank failures and bailouts and ensure that banks don’t bring down the economy,” Rep. Maxine Waters, D-Calif., said in urging her colleagues to oppose the bill.

The financial industry isn’t suffering under Dodd-Frank, she said. Waters noted that the Federal Deposit Insurance Corp. reported Tuesday that U.S. banks had a record $56 billion in profits in the first quarter of the year.

The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted in the wake of the 2008 financial crisis with almost no Republican support. It was one of President Obama’s signature accomplishments.

The legislation toughened bank regulations, sought to avoid future bailouts by creating a process to shut down teetering financial giants, established a powerful panel of regulators to watch for signs of instability and created the Consumer Financial Protection Bureau to oversee credit cards, mortgages and other financial products.

Republicans and bankers complained from the start that the changes were too heavy-handed.

Trump has called Dodd-Frank a “very negative force” in the economy and vowed during the 2016 presidential campaign to dismantle it. One of his early actions upon taking office last year was to order the Treasury Department to review the law and propose changes.

Last June, Treasury Secretary Steven T. Mnuchin recommended a major overhaul. But Democratic support in the Senate was necessary to make changes to the law.

Two frequently-criticized pillars of Dodd-Frank were left intact.

The legislation does not remove the ability of regulators to designate large firms as a risk to the financial system and to try to shut them down if they’re on the verge of failing without causing spillover effects to other companies as happened in 2008.

And the bill makes no structural changes to the consumer bureau, whose authority Republicans have sought to significantly weaken in part by making its chief serve at the pleasure of the president instead of only being removable for cause.