By Jeff Bater
Sept. 9 — The House Financial Services Committee has scheduled a markup in the week ahead for a Republican plan to scale back the Dodd-Frank law.
Analysts don't believe the bill (H.R. 5983) sponsored by Chairman Jeb Hensarling (R-Texas) will make it through Congress. Instead, they see the Financial CHOICE Act as a platform for Dodd-Frank foes next year.
In a Sept. 9 report, Keefe, Bruyette & Woods analyst Brian Gardner predicted the bill will not go far beyond the committee in 2016. “We see next week's vote as part of an effort by House Republicans to show what their 2017 agenda would look like,” he wrote. “We do not see next week's vote as a serious step towards replacing Dodd-Frank since, in our view, there is no chance the Senate will vote on the bill this year.”
Hensarling unveiled his plan in June and the committee held a hearing July 12. A witness, Adam Levitin, a Georgetown University law professor, acknowledged Dodd-Frank's shortcomings, but said the draft bill is “the wrong solution” and would endanger U.S. financial stability.
Republicans say the bill will end taxpayer-funded bailouts of large financial institutions and relieve banks that elect to be strongly capitalized from “growth-strangling regulation.”
A summary of the proposal calls for repealing Dodd-Frank’s Title II orderly liquidation authority, which authorizes the Federal Deposit Insurance Corp. to borrow from the Treasury to lend to a failing firm, buy its assets, guarantee its obligations and pay off its creditors. Hensarling said Title II should be replaced with a new chapter of the Bankruptcy Code designed to accommodate the failure of a large, complex financial firm.
Hensarling wants to replace the Consumer Financial Protection Bureau with a five-member panel known as the Consumer Financial Opportunity Commission. In addition, under the Republicans' plan, banks that maintain a simple leverage ratio of at least 10 percent and have a composite CAMELS rating of 1 or 2 may elect to be functionally exempt from the post-Dodd-Frank supervisory regime, the Basel III capital and liquidity standards, and a number of other regulatory burdens that predate Dodd-Frank.
Jim Purcell, chairman of State National Bank of Big Spring, Texas, supports the bill, along with other Texas lenders. “Perhaps there is a post-Dodd-Frank business model that works by spreading the ever-rising costs of regulatory compliance over a growing or more affluent customer base, but that doesn't work for banks located in small towns and rural areas,” he said in remarks for the July 12 hearing.
KBW's Gardner said he doubts the Financial CHOICE Act will pass intact next year, either, but thinks some of it, especially provisions for small bank regulatory relief, could become part of banking legislation in 2017.
“We think some observers underestimate the prospects that Congress and a new administration will try and modify Dodd-Frank in ways that are positive for community and regional banks and negative for the G-SIBs (global systemically important banks),” he wrote.
Also in the week ahead, a Federal Reserve governor, Lael Brainard, will address an event sponsored by the Chicago Council on Global Affairs, a nonpartisan research group.
Brainard's Sept. 12 speech is slated to focus on the economic outlook and monetary policy implications. But the text of the remarks or a subsequent question-and-answer session could turn to the topic of banking regulation.
To contact the reporter on this story: Jeff Bater in Washington at email@example.com
To contact the editor responsible for this story: Mike Ferullo in Washington at firstname.lastname@example.org
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)