House Dems split on Dodd-Frank changes


That bill would exempt from new regulations derivatives trades that occur between affiliates of the same company.

The debate at the House Financial Services Committee saw several Democrats flip-flop on measures, announcing opposition the bills after backing similar measures cleared by the panel in the prior Congress.

Rep. Maxine Waters (D-Calif.), the ranking member on the committee, opposed a measure that would allow banks to house some of their derivatives activity within their federally-insured branches (Dodd-Frank required banks to "push out" all that activity to affiliates without deposit insurance), after the bill cleared the committee by a voice vote in 2012.

"This was not controversial legislation," said Rep. Jim Himes (D-Conn.), one of the bill's sponsors.

But now, Waters contended that she could not back the change until regulators finalized key pieces of Dodd-Frank, including the Volcker Rule.

"It is important that we have a complete set of workable rules before we start reversing pieces," she said.

Financial reform advocates have loudly criticized the bills, especially after they were easily passed by the House Agriculture Committee earlier this year. And on Monday, Treasury Secretary Jack LewJacob (Jack) Joseph LewThe Hill's Morning Report - Biden argues for legislative patience, urgent action amid crisis On The Money: Senate confirms Yellen as first female Treasury secretary | Biden says he's open to tighter income limits for stimulus checks | Administration will look to expedite getting Tubman on bill Sorry Mr. Jackson, Tubman on the is real MORE said the administration opposed the measures, echoing his predecessor, Timothy Geithner, when the measures first appeared.

Nonetheless, Republicans were quick to point out the bipartisan past of many of these bills amidst the newfound opposition.

"I'm still trying to figure out substantially what has changed here to cause members to decide to oppose a bill that they previously supported," said Chairman Jeb Hensarling (R-Texas).

Waters's opposition came as other high-ranking Democrats on the panel threw their support behind the measure. Rep. Carolyn Maloney (D-N.Y.) argued the bill actually would help achieve the goals of Dodd-Frank by trimming back inadvertently problematic rules.

"Sometimes regulations look better when they're written than when you see the reality," she said.

And Rep. David Scott (D-Ga.), said the committee should be commended for debating the measure.

"There's no more glaring unintended consequence than what we face here," he said.

Waters and other Democrats argued that the last year has yielded evidence suggesting such bills were not prudent, pointing to the multibillion dollar trading losses suffered by JPMorgan in its "London Whale" catastrophe as evidence.

"I'll admit that between the last time we saw this and now, I've had an opportunity to think about it more and hear more arguments against it," said Rep. Keith Ellison (D-Minn.).

The debate, which at times became contentious, saw some Democrats caught in the middle of a tug-of-war, trying to craft a bipartisan bill while ducking fire from their own party.

At one point, Moore offered an amendment to her inter-affiliate legislation, aimed at curbing potential abuse of international affiliates to make risky trades. When her fellow co-sponsor, Rep. Steve Stivers (R-Ohio) aired concerns about the amendment, she agreed to withdraw it, earning a critique from Waters, who already said she was worried about the bill.

"Now I am even more concerned," she said. Moore then re-introduced the amendment to the bill, before agreeing to rework the language before the committee would vote on the full measure.

The bill was ultimately passed with bipartisan support, but Moore's amendment was defeated.

The standoffs came after the committee easily cleared several bills with unanimous support. One of those bills would require the Securities and Exchange Commission (SEC) to meet a statutory deadline for regulations implementing the Jumpstart Our Business Startups (JOBS) Act, which Republicans have long decried as long overdue. Another measure would raise the threshold for which a savings and loan would have to register with the SEC, while a third removed a legal requirement from Dodd-Frank imposed on foreign governments that regulators had said was unworkable.

Another bill easily cleared by the committee would direct the Financial Stability Oversight Council (FSOC) to study the impact that would occur if the U.S. and other nations differently implemented capital requirements pertaining to derivatives. And a final bill cleared by voice vote would explicitly exempt end users of derivatives from new regulatory requirements, making explicit previously aired congressional intent.

Another bill, which would require the SEC to conduct cost-benefit analysis on new regulations, was approved by the committee down a party-line vote.