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Cohn: Congress nearing deal to ease bank regulations

Cohn: Congress nearing deal to ease bank regulations
© Greg Nash

Top White House economic adviser Gary Cohn said Monday that Congress could act to exempt major United States banks from tight Dodd-Frank Act banking rules by the end of 2017.

Cohn, speaking to a banking industry conference in Chicago, said the White House and lawmakers from both parties are nearing an agreement to raise the threshold at which a bank is considered a “systemically important financial institution" (SIFI). Such banks are subject to stricter federal oversight and higher stability standards.

Cohn said that the new SIFI threshold be raised to at least $200 billion from its current level of $50 billion.

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“We need to move those capital levels back to more rational levels,” Cohn, director of the White House's National Economic Council, told the American Banking Association conference on Monday.

Passed after the 2008 financial crisis, Dodd-Frank requires tougher federal oversight of the nation's banking system.

The law creates increasing levels of federal oversight and higher capital requirements for banks. The rules are meant to ensure that banks do not fail and trigger a crisis.

Banks with more than $10 billion in assets face stricter inspections from federal regulators, and banks with more than $250 billion face even tighter requirements.

But the banking industry has long complained that the $50 billion SIFI threshold is an arbitrary level that includes banks too small to make a major dent on the global economy. Raising the SIFI level above $50 billion would exempt several U.S. regional banks from the regulations, which they say stifle their ability to lend to worthy customers.

Lawmakers and regulators across party lines have backed an increase to the SIFI threshold, and Cohn said he’s “encouraged” by talks with Senate Banking Committee members from both sides. Four moderate Democrats on the Senate Banking Committee asked the panel’s chairman last week to strike a bipartisan deal to amend Dodd-Frank after supporting a similar failed effort in 2015.

Cohn added that he’s talked with House Financial Services Committee Chairman Jeb Hensarling (R-Texas) about what the conservative leader “is willing to accommodate.” Hensarling, architect of the most sweeping attempt to roll back Dodd-Frank, has expressed openness to bipartisan fixes to the 2010 banking law.

Cohn said raising the SIFI threshold was a key aspect of the Trump administration’s mission to “let banks be banks again … in the way they think they should do it, not the way the government thinks they should do it.”

He also said the administration is eager to fill several financial regulatory vacancies, bemoaning the slow movement of Trump nominees through the Senate confirmation process.

“Getting our personnel into place has taken us a lot longer than we could have ever imagined,” Cohn said.

Trump will soon make a slate of critical financial regulatory appointments. The president is expected to announce within weeks a nominee to replace Federal Reserve Board Chairwoman Janet Yellen. He will also need to nominate a replacement for former Vice Chairman Stanley Fischer.

Randy Quarles, the Fed vice chairman for supervision and Trump’s first appointee to the central bank, began his term this month. Cohn also said that the FBI is currently vetting potential nominees for a Fed board spot established for a community banker.

This story was updated at 2:43 p.m.