Spring brings thaw in debate over changes to Dodd-Frank law

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Supporters and critics of the Dodd-Frank financial reform law are in broad agreement that the time has come to begin discussing changes to the Wall Street overhaul.

It’s a thaw between Democrats and Republicans long frozen in their positions on how best to respond to the financial crisis that rocked the economy in 2008.

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Democrats pushed through a new system of regulations with virtually no Republican support in 2010, and for years rejected any changes to the law on the grounds that it would open the door to legislative sabotage by Wall Street and the big banks.

But that’s changing now, with critics of the law increasingly finding bipartisan support for minor and targeted changes.

“Listening doesn’t always equate to action,” said James Ballentine, a lobbyist for the American Bankers Association. “But before, even the prospect of listening was not open. We certainly have a lot more of that.”

On Tuesday, the House of Representatives agreed to a specific tweak to the “Volcker Rule,” a centerpiece of Dodd-Frank, by a voice vote. That same day, a bipartisan group of senators unveiled legislation that would clarify another Dodd-Frank provision to make certain that insurance companies are not inadvertently affected by new bank capital requirements.

Those moves came after the House Agriculture Committee easily passed a bill earlier this month that reauthorized the Commodity Futures Trading Commission (CFTC), while altering some of that regulator’s expanded responsibilities under the Wall Street overhaul.

The action around Dodd-Frank suggests that even if major changes to the sweeping law are not imminent, the conversation is at least beginning.

“There’s no question that next year, I think you will see a number of bills move through the House and Senate and be actually sent to the president,” said Camden Fine, president and CEO of the Independent Community Bankers of America. “It’s possible that two or three smaller bills could move this year.”

Advocates for the financial industry aren’t the only ones eager to take a second look at the law. Sen. Sherrod BrownSherrod BrownLawmakers play catch-up as smartphone banking surges Overnight Finance: McConnell offers 'clean' funding bill | Dems pan proposal | Flint aid, internet measure not included | More heat for Wells Fargo | New concerns on investor visas House votes to eliminate Olympic medal tax MORE (D-Ohio), a frequent critic of the big banks who stands a chance of becoming the next Senate Banking Committee chairman, is a leading sponsor of the Senate bill introduced Tuesday.

The Senate has long served as the firewall for Dodd-Frank. While Republicans in the House have passed a slew of changes to the law, Senate Democrats have refused to take them up. Furthermore, the White House has frequently issued veto threats on Dodd-Frank tweaks, calling them premature.

But Brown told The Hill Wednesday that his bill, which he is co-sponsoring with Sens. Susan CollinsSusan CollinsSwing-state Republicans play up efforts for gun control laws Reid knocks GOP on gun 'terror loophole' after attacks GOP pressures Kerry on Russia's use of Iranian airbase MORE (R-Maine) and Mike JohannsMike JohannsTo buy a Swiss company, ChemChina must pass through Washington Republican senator vows to block nominees over ObamaCare co-ops Revisiting insurance regulatory reform in a post-crisis world MORE (R-Neb.), looks to avoid those pitfalls.

“It’s very narrowly constructed. It’s very bipartisan,” he said. “None of the sponsors have any interest in opening up Dodd-Frank. We’re working with leadership to make sure that doesn’t happen.”

On the reform law more broadly, Brown said he was hopeful that Congress could eventually consider fixes to the law without GOP efforts to undermine it.

“The way this place used to operate is you pass something, and even people that were opposed to it would work to try to implement it,” he said.

“There’s no way you write it and it doesn’t have some minor problems,” he added. “Republicans aren’t willing to do anything but ... hit it with a hammer.”

Congressional turnover has made the Dodd-Frank conversation easier to have, because many of the law’s stalwart defenders have made way for lawmakers who bring a new set of eyes to its provisions, sources say.

Both of the law’s titular sponsors, Sen. Chris Dodd (D-Conn.) and Rep. Barney Frank (D-Mass.), are now gone from Congress, and Senate Banking Committee Chairman Tim JohnsonTim JohnsonBank lobbyists counting down to Shelby’s exit Former GOP senator endorses Clinton after Orlando shooting Housing groups argue Freddie Mac's loss should spur finance reform MORE (D-S.D.), who has frequently resisted efforts to revisit the law, is retiring at the end of 2014.

“Chairman Johnson has always stated that he is open to making improvements to Wall Street reform, but they would have to be targeted and have overwhelming bipartisan support,” said spokesman Sean O’Black. “He has also repeatedly said he will not open up Wall Street Reform to mischievous changes. Many of the major rule-makings have just been completed, and he wants to give them a chance to be put in practice before considering any sweeping changes.”

Lobbyists say the arrival of a new crop of lawmakers has lowered the tension of the Dodd-Frank debate.

“New members come in that really had no dog in the fight and are looking at issues fresh ... I think that helps more than anything,” Ballentine said. “Those deeply involved in the creation of Dodd-Frank tend to be more set in their views.”

The renewed conversation around the law is not sitting well with some of its proponents.

Although some measures being discussed are limited in scope, Dodd-Frank backers have cried foul over the measure passed by the House Agriculture Committee, arguing it would hamstring regulators at the CFTC. While the bill received bipartisan support at the committee level, they are working to build resistance before it hits the floor.

“Ideally, a congressional education effort is going to show that that bill is extraordinarily dangerous,” said Bartlett Naylor, a financial policy advocate for Public Citizen.

Still, Naylor said he is heartened that even though minor tweaks to the law might be gaining steam, efforts to significantly roll it back are not.

“Is there an appetite to radically change Dodd-Frank or dilute it? I don’t think so,” he said.

Many do not expect Dodd-Frank to truly see changes until after the midterm elections. For one, control of the Senate is up for grabs and could alter how Dodd-Frank is handled. Furthermore, the House and Senate Banking panels have their hands full with a number of more pressing issues, including housing finance reform or reauthorization of the Terrorism Risk Insurance Program.

But conversations about small tweaks are a heartening sign for those who say Dodd-Frank needs a tune-up.

“They’re signals that in the next Congress ... you’re going to see substantial changes,” Fine said.