US Chamber seeking to replace provisions of Dodd-Frank reforms

The U.S. Chamber of Commerce on Thursday unveiled recommendations that would alter or outright repeal provisions of the landmark Dodd-Frank financial reform law, signaling it believes the time has come to overhaul how the nation oversees financial markets.

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The nation's largest business lobby is also pushing for further reforms in financial regulations it contends are essential for the health of business.

"Business needs a reliant, stable financial system," said David Hirschmann, president and CEO of the Chamber's Center on Capital Markets Competitiveness.

The recommendations mark a renewed push from the business lobby to continue tweaking Dodd-Frank, while taking further steps to modernize and streamline the nation's financial regulatory infrastructure. 

But with the politics around Dodd-Frank still running quite hot in some areas, Chamber officials acknowledged that they face an uphill climb.

The Chamber's recommendations to Congress and regulators include ones that would heighten checks on new agencies created by Dodd-Frank, reduce the reach of new restrictions on derivatives, and overhaul the structure of the Securities and Exchange Commission (SEC).

The Chamber also called for the repeal of some of the more contentious pieces of the law, including the "Volcker Rule," a provision aimed at banning risky proprietary trading by banks. It has yet to be implemented as regulators grapple with defining such trades while exempting legitimate business activities. 

Instead, the Chamber said Congress should scrap the rule, and simply adopt higher capital requirements for financial institutions that engage in the trading to provide a bigger cushion for losses. The rule has been delayed several times as regulators continue to process a torrent of comments and critiques on the issue.

"Ultimately, a lot of smart minds have spent a lot of time on it, and haven't come up with a way to preserve what is fundamental while addressing the concern," said Hirschmann.

Nearly all efforts to alter Dodd-Frank have been stymied since its enactment, as Democrats feared a reopening of the law would invite efforts to disassemble it. But the Chamber believes the time may finally have come, two and a half years later, for Congress to revisit the law on specific points.

"We hear on a bipartisan basis some openness," said Hirschmann, before adding, "the politics are always tough."

Chamber officials also point to a series of bills that would rein in several new restrictions on derivatives as evidence that Congress is ready to consider financial regulatory changes again. The bills cleared the House Agriculture Committee with bipartisan support in March.

However, the business lobby is also pushing for changes on some of the most entrenched and contentious parts over the law. For example, the group backs a push by Republican lawmakers to alter the structure and funding of the Consumer Financial Protection Bureau (CFPB) that has been staunchly opposed by Democrats.

But Hirschmann maintained that behind closed doors, there may be more receptivity to changes than lawmakers are letting on publicly, for fear of being accused of "caving" on consumer protections.

The business lobby also pushed for increased transparency from the Financial Stability Oversight Council (FSOC), a new Dodd-Frank regulatory body, as well as the Office of Financial Research, another new office designed to gather data about the financial system. The Chamber also wants to see that office's budget brought under the control of congressional appropriators.

While the Chamber sought to strike a productive tone with regulators and Congress with its recommendations, Hirschmann indicated that the business lobby is still prepared to go to court if it feels the need. 

The Chamber has previously joined legal challenges to other Dodd-Frank rule makings, such as one implementing a provision requiring companies to identify if their materials came from conflict-stricken regions of Africa (the group recommended repealing that rule). 

But Hirschmann emphasized that while the Chamber is reserving court challenges as a tool, it depends on the end product from regulators.

"Yea, there probably will be more lawsuits, but it's not because we're sitting here plotting out a litigation strategy," he said. "We had not planned on litigating conflict minerals … but when we looked at what the SEC came up with … that ultimately makes it unworkable. And that's why we ended up in court."

As part of its recommendations, the Chamber also urged lawmakers to make progress on one of its biggest agenda items in the 113th Congress: housing finance reform. 

With Fannie Mae and Freddie Mac playing a dominant role in the market today, the Chamber called on Congress and regulators to entice the private sector back into the market. 

But while both parties acknowledge the need for housing reform, the complex issue is thought to be the subject of more talk and less action — at least in 2013.