House Republicans warming to Senate deal on Dodd-Frank

House Republicans warming to Senate deal on Dodd-Frank
© Greg Nash

House Republicans are warming up to a Senate bill that would loosen the banking rules put in place after the financial crisis.

The Senate is poised this week to pass the most significant changes to the Dodd-Frank Act since it became law in 2010. The bill has the support of more than a dozen Democrats, making it one of the few measures with a chance to become law this year.

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With the GOP searching for accomplishments to tout ahead of the midterm elections, House conservatives who once derided the Senate bill are taking a second look, suggesting they may be open to compromise.

“I want to do what’s good for Main Street. I’m a dealmaker, so maybe not everything’s in it, but maybe there’s something that we can be happy with in it,” said Rep. Roger WilliamsJohn (Roger) Roger WilliamsGOP divided on anti-Biden midterm message The Hill's Morning Report - Bidens to visit Surfside, Fla., collapse site Trump, GOP return to border to rev up base MORE (R-Texas). He had called the Senate’s plan a “non-starter” in December.

“I want to find a way to support it. We’ll see if we can get there.”

House Republicans have been skeptical of the Senate’s push to revamp Dodd-Frank. Conservatives said the Senate should instead take up the Choice Act, a sweeping rewrite of the law that the House passed last year.

But Senate Democrats are dead-set against the Choice Act, meaning the bill that passes the chamber this week could be the GOP’s only shot at changing Dodd-Frank before the midterms.

Rep. Dennis RossDennis Alan RossBiden's quiet diplomacy under pressure as Israel-Hamas fighting intensifies Biden needs to tear down bureaucratic walls and refocus Middle East programs Balancing act: Biden must redefine the US-Saudi relationship MORE (R-Fla.), a member of the House Financial Services Committee who expressed concerns with the Senate bill in December, said the GOP could boost the economy — and its message — by pairing their tax cuts with a Dodd-Frank rollback.

“That’s the tailwind we want to see going into this midterm, and I think that’s what the American people want to see,” Ross, a member of the GOP whip team, told The Hill. “You combine those things together, I think that’s something our leadership wants to see get done.”

The Senate bill, introduced by Senate Banking Committee Chairman Mike CrapoMichael (Mike) Dean CrapoThe Hill's 12:30 Report - Presented by Facebook - US gymnast wins all-around gold as Simone Biles cheers from the stands The Hill's Morning Report - Presented by Facebook - A huge win for Biden, centrist senators The 17 Republicans who voted to advance the Senate infrastructure bill MORE (R-Idaho), would exempt roughly two dozen banks from stricter Federal Reserve oversight and a slew of smaller firms from lending and mortgage disclosure rules. It’s backed by a bipartisan coalition, including a filibuster-proof buffer of 13 Democrats.

“This is not the last chance for changes, but if this does not pass, it cements Dodd-Frank as is for the foreseeable future,” said a banking lobbyist backing the bill.

Senate Republicans had to step away from several GOP priorities to craft a bipartisan bill. Their measure doesn’t touch the Consumer Financial Protection Bureau, the controversial financial watchdog agency created by Dodd-Frank that Republicans oppose.

The Senate bill also maintains hard caps on levels of federal regulation instead of replacing them with tests preferred by the House that judge firms by risk. Republicans in the lower chamber have also taken issue with the Senate bill’s preservation of a process through which the federal government can dismantle a failing bank before it can cause a credit freeze.

House Republicans made those issues the foundation of their Dodd-Frank rewrite and have been loath to abandon them.

“This isn’t even a rewrite of Dodd-Frank. It’s a recalibration,” House Financial Services Committee Chairman Jeb HensarlingThomas (Jeb) Jeb HensarlingLawmakers battle over future of Ex-Im Bank House passes Ex-Im Bank reboot bill opposed by White House, McConnell Has Congress lost the ability or the will to pass a unanimous bipartisan small business bill? MORE (R-Texas), the Choice Act’s sponsor, told The Hill.

Hensarling ceded that the Senate bill “will provide some significant pro-growth help” to smaller banks and credit unions, but said he’d reserve judgment on Crapo’s bill until it passes.

“We’re in fairly constant communication, but, you know, it’s his bill, not my bill,” Hensarling said.

Hensarling, who is retiring at the end of this Congress, is leading the Republican effort to amend the Senate bill to earn more House support. The chairman and Democratic sponsors of the Senate deal have been negotiating over adding amendments to Dodd-Frank that passed the House almost unanimously.

Republicans on the Financial Services Committee say that there are roughly 40 bills, some taken from the Choice Act, that could be added to the bill without issue.

“It’s important for those senators to recognize that the House, too, has done good work, and these are the bipartisan priorities of the House that do nothing other than complement their good work,” said Rep. French HillJames (French) French HillTop Democrat leads bipartisan trip to Middle East The Hill's Morning Report - Bidens to visit Surfside, Fla., collapse site On The Money: Pelosi rebuffs McConnell on infrastructure | White House mounts full-court press on infrastructure deal | Supreme Court leaves CDC eviction moratorium intact MORE (R-Ark.).

Senate Democrats said Tuesday they’re eager to bring the House in on the process, but won’t negotiate a new bill or accept major changes.

“If you go to a completely different bill in the House, what you’re actually doing is ensuring that nothing will happen,” said Sen. Joe DonnellyJoseph (Joe) Simon DonnellySupreme Court battle could wreak havoc with Biden's 2020 agenda Republicans fret over divisive candidates Everybody wants Joe Manchin MORE (Ind.), a Democrat up for reelection this year who is backing the Senate deal.

“What we’ve been trying to do is make sure that the House’s views are brought into this, made part of it, and that they can feel ownership of it.”

It’s unclear how much sway the House will have in the process. Hensarling has been adamant about reshaping Dodd-Frank and not just amending it. But senators who support the Crapo bill say it’s a fragile bipartisan compromise that could fall apart with too much tinkering.

Changes intended to sway the House were added to the bill through a substitute amendment from Crapo. The additions included several House bills meant to expand financing options for entrepreneurs, protect military veterans from fraud, create new student loan safeguards and mandate studies on various risks to the financial system.

“Those bills that get bipartisan support, we expect to be in the final package,” Hensarling said. “I don’t know any other way to put it.”

But time is running out to pass a Dodd-Frank bill. Liberals have railed against the measure, turning up the heat on the Senate Democrats who are backing it. Many of the Senate Democrats supporting the bill are facing tough reelections in states that voted for President TrumpDonald TrumpTrump PACs brought in over M for the first half of 2021 Chicago owes Trump M tax refund, state's attorney mounts legal challenge Biden hits resistance from unions on vaccine requirement MORE in 2016.

“There will be tremendous pressure on the House to not sink any kind of compromise between this and the Choice Act. I think that would be folly,” said Sen. Heidi HeitkampMary (Heidi) Kathryn HeitkampJoe Manchin's secret Supreme Court battle could wreak havoc with Biden's 2020 agenda Effective and profitable climate solutions are within the nation's farms and forests MORE (N.D.), another Democrat up for reelection this year who is backing the bill.

“This is a moment in time, and I think House leadership understands that.”