While the Financial Choice Act of 2017, the Republican bill to derail Dodd-Frank and Labor’s fiduciary rule, passed out of the House Financial Services Committee in early May, chances of getting it through the Senate fully intact — and passed into law this year — are unlikely.
After three days of raucous debate, the Financial Choice Act passed the committee by a 34-26 vote. Democrats vehemently opposed provisions of the bill that gut the Consumer Financial Protection Bureau, kill the Volcker rule and repeal the Labor Department’s fiduciary rule so that the Securities and Exchange Commission can move first on its own fiduciary standard.
Duane Thompson, senior policy analyst at fi360, said that GOP House members’ Creating Hope and Opportunity for American Investors, Consumers, and Entrepreneurs (Choice) Act will face changes in the Senate Banking Committee — which has 12 Republicans and 11 Democrats. While the bill stands a chance of getting out of committee in some form, it would need 60 votes to pass the full Senate.
“If anything gets into final law, it will be some easing of regulations on community banks, possibly getting rid of the Volcker Rule, but not the DOL fiduciary rule repeal,” Thompson opined.
The Choice Act has “a 5% chance of becoming law at this point,” Thompson argued. “The only reason it might pass is if the Senate changes its rules on filibusters to a simple majority of 51, but right now most Republicans and Democrats agree they don’t want to do that.”
House Financial Services Committee Chairman Jeb Hensarling’s Financial Choice Act “is also going to have to compete with health care and tax reform this year,” Thompson argued. “It’s not clear Congress is going to be able to tackle all three this year and finish their work.”
After the bill passed, Hensarling said that the Choice Act “ends bailouts so Washington can never again pick taxpayers’ pockets and hand the money over to big banks. With the Financial Choice Act, the era of big bank bailouts and ‘too big to fail’ will be over. There will be bankruptcy for failed banks, not bailouts.”
Banks that qualify “for much-needed regulatory relief will be so well-capitalized that they pose no threat to taxpayers or the economy. Our plan replaces Dodd-Frank’s growth-strangling regulations on small banks and credit unions with reforms that expand access to capital so small businesses on Main Street can grow and create jobs,” added Hensarling, R-Texas.
Sen. Elizabeth Warren, D-Mass., lambasted the Choice Act in testimony before Democratic members of the committee days before the bill’s markup. She called the act a “586-page insult to working families.”
The act, which would dismantle the CFPB Warren helped set up, is “about throwing people under the bus so that lobbyists can do the bidding of Wall Street.”
Investment Company Institute President and CEO Paul Schott Stevens applauded passage of the bill out of committee and urged Congress “to move ahead” with the act’s “wide-reaching reforms” that fix “flawed aspects of the Dodd-Frank Act.”
The bill passed the full House on June 8.
Groups push for SEC Fiduciary Rule
Financial Services Roundtable CEO Tim Pawlenty also applauded passage of the act, stating that advisors’ regulation and oversight “should be the primary responsibility” of the SEC, as it has “the expertise, knowledge and authority to most effectively and efficiently coordinate the myriad of applicable laws and regulations pertaining to such investment activities.”
FSR was among the chorus of industry trade groups that pressed newly christened SEC Chairman Jay Clayton to move on issuing a uniform fiduciary rule for brokers and advisors.
Clayton’s priorities should be proposing a “harmonized best interest standard” for broker-dealers and bringing mutual fund disclosure into the 21st century by allowing ETFs, mutual funds and variable insurance products to deliver prospectuses online, Stevens said at ICI’s annual conference in Washington in early May.