Power struggle threatens to sink bank legislation

Power struggle threatens to sink bank legislation
© Greg Nash

A power struggle between House Republicans and Senate Democrats could kill what's seen as the last chance Congress has to revise the strict banking rules enacted by former President Obama.

Speaker Paul RyanPaul Davis RyanRubio discovers Native American heritage through TV show Feminine hygiene products to be available to House lawmakers using congressional funds Former Ryan aide moves to K street MORE (R-Wis.) has vowed to freeze a bipartisan Senate bill to loosen the 2010 Dodd-Frank Act until senators agree to negotiate changes.

But Senate Democrats who spent years working on the measure have ruled out amending it. They say House Republicans should quickly pass the bill, calling it the most sweeping revamp of Dodd-Frank to ever earn bipartisan support.

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The battle threatens to derail one of the few major pieces of legislation with a chance to pass before the midterm elections. 

"We're not rubber-stamping the Senate bill,” said House Financial Services Committee Chairman Jeb HensarlingThomas (Jeb) Jeb HensarlingThe next two years of federal housing policy could be positive under Mark Calabria Why Ocasio-Cortez should make flood insurance reform a priority Exiting lawmakers jockey for K Street perch MORE (R-Texas). “Their bill is staying on the Speaker's desk unless and until they're willing to negotiate with the House."

The Senate on Wednesday passed a bipartisan bill to exempt dozens of banks from some of the strictest parts of Dodd-Frank. Introduced by Senate Banking Committee Chairman Mike CrapoMichael (Mike) Dean CrapoOn The Money: Lawmakers race to pass border deal | Trump rips 'stingy' Democrats, but says shutdown would be 'terrible' | Battle over contractor back pay | Banking panel kicks off data security talks Hillicon Valley: Lawmakers press officials on 2020 election security | T-Mobile, Sprint execs defend merger before Congress | Officials charge alleged Iranian spy | Senate panel kicks off talks on data security bill Senate Banking panel kicks off talks on data security bill MORE (R-Idaho), the bill was the product of years of talks between Republicans and Democrats concerned about Dodd-Frank’s impact on smaller lenders.

The bill was introduced in November with the support of 12 Senate Democrats, neutralizing the opposition of liberal colleagues who opposed it. It passed this week with the support of 67 senators — one of the few major bills passed under President TrumpDonald John TrumpBill Kristol resurfaces video of Pence calling Obama executive action on immigration a 'profound mistake' ACLU says planned national emergency declaration is 'clear abuse of presidential power' O'Rourke says he'd 'absolutely' take down border wall near El Paso if he could MORE backed by more than two-thirds of the chamber.

Sponsors of the deal hailed it as a bipartisan breakthrough that would provide critical relief to suffocating community banks and credit unions. They said swift House passage of the bill was essential not only for struggling communities, but for a Congress too often mired in gridlock. 

"If we're able to get this done and move forward, the message to the public is ‘yes, we can function,’ " said Sen. Heidi HeitkampMary (Heidi) Kathryn HeitkampOvernight Energy: Trump taps ex-oil lobbyist Bernhardt to lead Interior | Bernhardt slams Obama officials for agency's ethics issues | Head of major green group steps down Trump picks ex-oil lobbyist David Bernhardt for Interior secretary On The Money: Shutdown Day 27 | Trump fires back at Pelosi by canceling her foreign travel | Dems blast 'petty' move | Trump also cancels delegation to Davos | House votes to disapprove of Trump lifting Russia sanction MORE (D-N.D.), a sponsor of the Senate bill, last week. “This is a moment in time and I think House leadership understands that."

Senators backing the deal pushed for the House to pass their bill without delay and expected pressure to build on Republicans who’ve long sought to roll back Dodd-Frank.

But House leaders aren’t budging. Hensarling, a close Ryan ally, told reporters Thursday that the Speaker promised him the Senate bill won’t move until senators agree to negotiations.

A spokeswoman for Crapo declined to comment.

Hensarling and fellow Financial Services Committee Republicans said the Senate’s bipartisan bill should also reflect the will of the House. They insist dozens of bills from their panel that passed with little to no opposition would be uncontroversial additions to the Senate package.

The committee circulated a list of more than two dozen bills that Democrats widely backed. Most of those are intended help small businesses raise capital by loosening securities laws and other financial rules. Hensarling cited bills to ease registration requirements for mergers and acquisitions brokers and independent investors, along with a measure to crack down on human trafficking. 

"There are some tough votes in this, but these are not the tough ones,” added Rep. Bill Huizenga (R-Mich.), who chairs the Financial Services panel’s capital markets subcommittee. 

“These are things that have a lot of commonality, a lot of support, and frankly deserve to have a proper hearing."

Senate Democrats behind the deal say they don’t want to jeopardize the bill’s careful bipartisan balance. They say they’ve already included more than 40 bill and provisions passed by the House on their own or through the CHOICE Act, Hensarling’s sweeping Dodd-Frank rewrite that the Senate ignored after it passed in June 2017.

Close to half of the Democrats backing the Senate bill are up for reelection this year in states that voted overwhelmingly for Trump in 2016. The legislation opened a brutal intraparty debate between those moderates and liberal senators such as Elizabeth WarrenElizabeth Ann WarrenWarren's 'ultra wealth' tax is misleading Hillicon Valley: New York says goodbye to Amazon's HQ2 | AOC reacts: 'Anything is possible' | FTC pushes for record Facebook fine | Cyber threats to utilities on the rise O’Rourke heading to Wisconsin amid 2020 speculation MORE (D-Mass.) and Sherrod BrownSherrod Campbell BrownShep Smith: Signing funding bill is a 'loss' for Trump no matter how it's packaged Exclusive: Biden almost certain to enter 2020 race Tim Ryan ‘seriously considering’ 2020 bid MORE (D-Ohio), who channeled the wrath of the progressive base against the bill.

Hensarling is one of the most conservative members of Congress, and his CHOICE Act was panned by senators and industry insiders as an unrealistic wish list. While Hensarling praised the Senate for taking a strong “first step” to rein in Dodd-Frank, he said the chamber’s bill falls short of what’s needed. 

"I wish the bill did 10 percent of what Sherrod Brown and Elizabeth Warren said it did,” Hensarling said.

Democratic senators, having already taken heat from the left over the bill, are wary of giving Hensarling a chance to drag the bill to the right.

Heitkamp said in a Thursday statement that reopening the bill would “prevent Congress from achieving the shared goal of providing relief for community banks and credit unions.” 

“I respect that some House Republicans want to amend our legislation,” Heitkamp said. “Our bill is the way to reach that bipartisan result that can actually pass in both chambers and become law.”

The delay has started a fresh round of lobbying for changes. While dozens of banks would be exempted from tougher federal oversight under the Senate bill, the industry would prefer to change the way regulators judge the risk of banks.

The Senate bill raises the threshold for tougher Federal Reserve oversight from $50 billion to $250 billion in assets. Bank lobbyists are pushing for lawmakers to scrap the asset threshold, which banks and lawmakers have called arbitrary, and replace it with a test that measures several factors — size included — to determine a bank’s riskiness. 

House Republicans and the financial industry are also desperate to rein in the controversial Consumer Financial Protection Bureau (CFPB). Democrats have long protected the CFPB and could abandon the bill if a provision changing the bureau is added.

House critics of the Senate bill say those issues wouldn’t be the focus of their negotiations. They insist they’re only looking to add one chamber’s bipartisan offerings to another’s and help boost the U.S. economy in the process.

"They worked hard to create a bipartisan vision for the bill that passed the Senate,” said Rep. French HillJames (French) French HillHere are the lawmakers who will forfeit their salaries during the shutdown Rep. French Hill wins after unexpected challenge Election Day: An hour-by-hour viewer’s guide MORE (R-Ark.), a Financial Services panel member. “We're proposing to do the same."