Bill Raising Risky Bank Asset Threshold Passes House

By Jeff Bater

Dec. 1 — The House passed a bill that would change how banks are designated for systemic risk, with a leading Democrat calling it the first step in the Trump agenda to deregulate Wall Street.

Lawmakers voted 254-161 for H.R. 6392, the Systemic Risk Designation Improvement Act of 2016.

The proposal loosens the systemic risk designation process established for banks under Dodd-Frank. Its sponsor, Rep. Blaine Luetkemeyer (R-Mo.) has criticized the process of designating as systemically risky any bank with assets above $50 billion, saying such an approach doesn’t take into account differences in business models.

Past Systemic Risk Bills

Luetkemeyer introduced the bill last year. H.R. 1309, which had some Democratic support, was approved by House Financial Services Committee in November 2015.

Sen. Richard Shelby (R-Ala.) proposed a bill last year calling for raising the asset threshold to $500 billion. Senate Democrats rejected Shelby’s threshold as too high, but those who have endorsed the idea of raising the threshold from $50 billion include Sen. Mark Warner (D-Va.), who serves on the Senate Banking Committee, and Federal Reserve Chair Janet Yellen.

Hopes for raising the threshold were dim, though, with Dodd-Frank’s staunch supporter, President Barack Obama, in position to veto any increase.

Luetkemeyer’s bill was reintroduced Nov. 22 this year, two weeks after the election that altered the balance of power in Washington and emboldened congressional Republicans who want to revamp Dodd-Frank.

Glimpse of Next Congress

While passage of the bill in a lame-duck session is largely theatrical, the floor debate for H.R. 6392 provided a glimpse of some of the partisan fighting that may occur in the next session of Congress, with Donald Trump in the Oval Office and Republicans pursuing a deregulatory agenda.

In floor debate Dec. 1 on H.R. 6392, Rep. Maxine Waters (D-Calif.), ranking member of the Financial Services Committee, said the bill would repeal Dodd-Frank’s $50 billion threshold, above which banks are subject to closer regulatory scrutiny, and prevent the Federal Reserve from regulating those banks.

“I rise today in strong opposition to H.R. 6392, the first step in the Trump agenda to deregulate Wall Street, despite candidate Trump’s pledges to hold elite bankers accountable,” Waters said. “In fact, as we debate this bill today, Trump Tower’s revolving door is spinning with Wall Street insiders.”

Of the 254 lawmakers in support of the bill, 20 were Democrats.

One Size Fits All

Rep. Jeb Hensarling (R-Texas), chairman of the committee, said the bill would “get rid of a totally arbitrary and static threshold currently used to designate institutions as systemically important.”

“It recognizes that regulations should consider different components of risk and not simply a Washington ‘one-size-fits-all’ definition,” he said, later adding, “I urge us to correct this Dodd-Frank mistake.”

The Regional Bank Coalition (RBC) and the Mid-Size Bank Coalition of America (MBCA) released a letter in support of the bill Nov. 30. “H.R. 6392 is a vital piece of legislation in addressing an improperly calibrated regulatory framework which currently employs an arbitrary asset threshold to evaluate bank risk — in turn hindering our banking institutions from serving our customers, communities and economy,” the letter said. “Our banks are forced to focus more on regulation compliance than serving the customers, which is reducing capital that can be used for lending.”

‘You Ain’t Seen Nothing Yet.’

Hensarling introduced a bill in September this year, the Financial CHOICE Act, that calls for rolling back parts of Dodd-Frank. Waters pointed out Hensarling’s bill — she called it the “Wrong Choice Act” — would repeal the same designation authority addressed in Luetkemeyer’s measure.

“Why is the majority even considering this bill today when the chairman’s Wall Street reform repeal package would render this bill moot?” she said. “It is clear that this is just the first act in a long, dangerous play that will continue well into next year.”

Hensarling took the floor after Waters finished speaking and said, “If the ranking member believes this is the first act in getting rid of Dodd-Frank, she ain’t seen nothing yet.”

To contact the reporter on this story: Jeff Bater in Washington at jbater@bna.com

To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com

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