Dodd-Frank Rollback Bill Advances in Senate

Ranking member Brown says Shelby’s package ‘a one-sided wish list’ favoring special interests over average Americans

The Financial Regulatory Improvement Act advances to the full Senate. The Financial Regulatory Improvement Act advances to the full Senate.

The Senate Banking Committee passed on a sharp party-line vote of 12-10 Thursday the Financial Regulatory Improvement Act of 2015, legislation introduced by the committee’s chairman, Sen. Richard Shelby, R-Ala., to roll back some major Dodd-Frank Act provisions.

The bill contains eight amendments that Shelby said during the markup address areas identified in various committee hearings as needing “revision or refinement.”

The bill, which has been referred to the full Senate, includes provisions to correct more than “300 nonsubstantive inaccuracies, omissions or errors” in the Dodd-Frank law, seeks changes in the process of designating banks as systemically important, increases “transparency” of the Federal Reserve Board, includes bipartisan measures for the Jumpstart Our Business Startups (JOBS) Act and calls for international discussions on capital standards for insurers.

But ranking member Sen. Sherrod Brown, D-Ohio — who along with his Democratic colleagues are offering an alternative reform bill to Shelby’s — stated at the markup that Shelby’s “package is a one-sided wish list — pleasing to various interest groups but lacking any provisions to help the average American trying to navigate our financial system.”

In some respects, Brown continued, “this legislation even deregulates the financial system beyond where it was in 2007 and 2008. It provides all kinds of institutions with legal immunity for the types of mortgages that led to the financial crisis.”

Sen. Elizabeth Warren, D-Mass., stated that “the last thing we should be doing is what’s in the chairman’s bill — making it harder for the Fed to supervise banks and making it easier for banks to offer risky mortgages.”

Americans for Financial Reform stated that the bill is “fundamentally misconceived: while its proponents claim to be focused on the needs of small community banks, the substance of the bill reads more like a deregulatory wish list for big banks and other large financial players.”

AFR stated that a “disturbing number of lawmakers are once again willing to act as shills for Wall Street and its discredited deregulatory agenda,” adding that it’s “unlikely that this dangerous bill or anything like it will become law.”

Shelby said that contrary to “a number of public statements,” Title 2 of the Financial Improvement Act “does not ‘move’ the $50 billion threshold” of automatically classifying a bank as systemically important. The bill, he said, “actually preserves the $50B threshold and merely changes the process by which a bank is designated as systemically important.”

The bill seeks to establish a process to designate bank holding companies (BHCs) as systemically important by replacing the existing framework, in which all BHCs with more than $50 billion in total consolidated assets are automatically deemed systemically important, with a framework that requires the Federal Reserve as well as the Financial Stability Oversight Council to evaluate BHCs with more than $50 billion and less than $500 billion in total consolidated assets, as indexed for GDP growth, for systemic designation based on size, interconnectedness, substitutability, cross-border activity and complexity.

Title 2 of the bill, Shelby said, “addresses the growing consensus that the mandatory $50B asset threshold contained in current law is not only arbitrary, it is a blunt instrument that acts as a substitute for more sophisticated and thoughtful supervision.”

Title 5 of the bill, “includes a number of modest provisions intended to address the need for increased transparency of the Federal Reserve,” Shelby said, with three of the provisions being ideas promoted by Democratic members of the committee. 

“Contrary to some public statements, Title 5 does not require the Fed to use any type of rule in the exercise of its monetary policy authorities. It merely requires disclosure of any rules the FOMC actually employs should it choose to do so,” Shelby stated. 

The title would also require a commission to look at the Fed’s structure and submit any recommendations it may have to Congress. “The Fed was created over 100 years ago," Shelby said. "It is probably time for a fresh look.”

--- Check out Chris Dodd and Barney Frank: Wall St. Reformers —The 2015 IA 35 for 35 on ThinkAdvisor.

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