Bipartisan Senate deal would curb Dodd-Frank rules

Bipartisan Senate deal would curb Dodd-Frank rules
© Greg Nash

The chairman of the Senate Banking Committee announced a deal on Monday with nine Democratic senators to exempt more than a dozen mid-sized banks from strict post-crisis regulations.

The bill from Chairman Mike CrapoMichael (Mike) Dean CrapoSenate GOP threatens to block defense bill    Republican Senators request military aid for Taiwan amid pressure from China Democrats narrow scope of IRS proposal amid GOP attacks MORE (R-Idaho) would raise the asset threshold at which a bank holding company is considered a “systemically important financial institution” (SIFI) from $50 billion to $250 billion.

SIFIs are subjected to stricter risk mitigation requirements, federal stress tests and oversight under the 2010 Dodd-Frank Act, enacted in the wake of the 2007-2008 financial crisis.

The deal would also exempt all banks with less than $100 billion in assets from federal oversight immediately.

The bill is sponsored by eight other Republican senators, seven of which are on the Banking Committee, and nine Democrats.

“The bipartisan proposals on which we have agreed will significantly improve our financial regulatory framework and foster economic growth by right-sizing regulation, particularly for smaller financial institutions and community banks,” Crapo said.

Democrats sponsoring the bill include Banking Committee members Sens. Joe DonnellyJoseph (Joe) Simon DonnellyBiden to have audience with pope, attend G20 summit Biden taps former Indiana Sen. Donnelly as ambassador to Vatican Republicans may regret restricting reproductive rights MORE (Ind.), Heidi HeitkampMary (Heidi) Kathryn HeitkampVirginia loss lays bare Democrats' struggle with rural voters Washington's oldest contact sport: Lobbyists scrum to dilute or kill Democrats' tax bill Progressives prepare to launch counterattack in tax fight MORE (N.D.), Jon TesterJonathan (Jon) TesterFive ways Senate could change Biden's spending plan Five Senate Democrats reportedly opposed to Biden banking nominee Dark money group spent 0M on voter turnout in 2020 MORE (Mont.) and Mark WarnerMark Robert WarnerFive Senate Democrats reportedly opposed to Biden banking nominee The Hill's Morning Report - Presented by ExxonMobil - House to vote on Biden social spending bill after McCarthy delay Overnight Defense & National Security — Presented by Boeing — US mulls Afghan evacuees' future MORE (Va.), along with Sens. Joe ManchinJoe ManchinKlobuchar confident spending bill will be finished before Christmas Democratic frustration growing over stagnating voting rights bills Key senators to watch on Democrats' social spending bill MORE (W.Va.), Claire McCaskillClaire Conner McCaskillLobbying world Ex-Rep. Akin dies at 74 Republicans may regret restricting reproductive rights MORE (Mo.), Tim KaineTimothy (Tim) Michael KaineDemocrats plow ahead as Manchin yo-yos Senate advances defense bill after delay Overnight Defense & National Security — Presented by Boeing — Senators to take up defense bill Wednesday MORE (Va.) and Gary PetersGary PetersFive ways Senate could change Biden's spending plan Overnight Defense & National Security — Presented by Boeing — US mulls Afghan evacuees' future Senators look to defense bill to move cybersecurity measures MORE (Mich.), and independent Sen. Angus KingAngus KingAmazon, Facebook, other large firms would pay more under proposed minimum tax, Warren's office says Senators look to defense bill to move cybersecurity measures Energy information chief blames market for high fuel prices MORE (Maine).

The bill also includes measures to expand consumer access to mortgages, reduce regulations on community banks and limit credit report data collection.

Senators have been hashing out a bill geared at providing regulatory relief for small and mid-sized banks subjected to strict post-crisis rules. The deal announced Monday is the broadest bipartisan effort to reshape Dodd-Frank.

Crapo and Sen. Sherrod BrownSherrod Campbell BrownBiden faces new pressure from climate groups after Powell pick Five Senate Democrats reportedly opposed to Biden banking nominee Senate Democrats call on Biden to push for COVID-19 vaccine patent waivers at WTO MORE (Ohio), ranking Banking panel Democrat, had been negotiating a deal to raise the SIFI threshold for months until talks fell apart last week. Moderate Democrats said soon after that they’d continue the negotiations.

Brown said Monday he opposed the bipartisan deal, saying “I understand my colleagues’ interest in agreeing to this legislation, but disagree on the wisdom of rolling back so many of Dodd-Frank’s protections with almost no gains for working families.”

“Banks made record profits last year and it looks like executives will get bigger bonuses this year. Hourly wages have stagnated for 40 years, and too many Americans are still feeling the impact of the 2008 financial crisis,” Brown said. “Who needs help the most?”

Though Brown and other Senate progressives are likely to oppose it, the bill could receive enough support to pass over a Democratic filibuster. Moderate Democrats, several facing reelection next year in states that voted for President Trump in 2016, have pushed for loosening rules on regional and community banks that serve their states.

“This bipartisan regulatory relief package is an example of what we can achieve when we work together, and the result of good-faith negotiations,” said Donnelly, who is up for reelection next year.

“Our bill is an example of how if Democrats and Republicans put partisanship aside and work together, we can reach real compromises that support the country,” said Heitkamp, also running for reelection.

“Every day I come to work in the U.S. Senate, I’m fighting for rural America — and that’s what our bipartisan bill is about,” Heitkamp said.

“It would provide needed relief to community banks and credit unions, so they can continue enabling small businesses to get financing to operate, helping farmers get loans to support their farms, and allowing families to buy homes in rural communities across our state," she continued.

Despite the bipartisan support, passing the Crapo bill would require unanimous Republican approval and a major chunk of Senate floor time as Congress scrambles to pass a tax overhaul and fund the government before the new year.

Several sponsors of the Crapo bill have also introduced their own smaller measures targeting parts of Dodd-Frank. Sen. David Perdue (R-Ga.) and McCaskill have sponsored a bill to replace the SIFI threshold with a test based on risk instead of size, a method prefered by the banking sector and regulators across ideologies.

The House Financial Services Committee has passed its own version of the Perdue-McCaskill bill, and will debate several bills targeting Dodd-Frank at a Tuesday markup.

After fighting for years against major portions of the law, the banking industry has sought smaller wins while the Trump administration attempts to reshape and slim down Dodd-Frank.

Lobbying groups pushing for rollbacks of Dodd-Frank rules called the Senate deal a good first step, but said they’d prefer a SIFI threshold based on a bank’s risk and lending profile, not size.

American Bankers Association President Rob Nichols said the group thinks “further adjustments are warranted, and ABA will continue to make the case that tailoring regulation based on a bank’s risk profile and business model — as a growing number of regulators support — is the best and most effective way to ensure banks are able to serve their communities while protecting safety and soundness.”

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Richard Hunt, CEO of the Consumer Bankers Association, called the deal “a significant first step,” but called for “policies which consider risk rather than arbitrary asset thresholds.”

Community banking groups were bolder in their support, as almost all of their firms would fall below the new SIFI thresholds.

Independent Community Bankers of America CEO Cam Fine said the group “strongly supports” the Crapo deal.

“Community bank regulatory relief is needed to improve lending and strengthen economic growth at the local level,” Fine said.

“We are pleased to see many provisions of ICBA’s Plan for Prosperity included in the agreement and thank all senators from both sides of the aisle who have contributed to this important initiative.”