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115th Congress on financial policy, 2017-2018

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115th Congress, 2017-2018
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Key votes • Budget • Financial policy • Taxes • Trade
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Key votes • Iran nuclear deal
See also: Federal policy on financial regulation, 2017-2018

President Donald Trump said that a goal of his administration would be to repeal or replace the Dodd-Frank Act. The act, signed into law by President Barack Obama (D), established about 400 new financial regulations and created four new federal agencies responsible for financial regulation and consumer protection in response to the global financial crisis of 2008.

On May 24, 2018, Trump signed S 2155—the Economic Growth, Regulatory Relief, and Consumer Protection Act—into law. The law exempts smaller banks from some of the regulations outlined in Dodd-Frank. Read more about the legislation here.

This page tracks the actions and comments of the 115th Congress on financial policy. Click on the timeline below to learn more about each headline.

What is finance and banking policy? Finance and banking policy determine what actions financial institutions, such as banks and insurance companies, may take when conducting their business, as well as how and what agencies may regulate them. Both federal and state governments are responsible for finance and banking policy in the United States.

May 24, 2018: Trump signs bill to rollback some Dodd-Frank financial regulations

On May 24, 2018, President Donald Trump signed S 2155—the Economic Growth, Regulatory Relief, and Consumer Protection Act—into law. The law exempts some banks from the Dodd–Frank Wall Street Reform and Consumer Protection Act that was signed into law by President Barack Obama (D) on July 21, 2010.

The law raised from $50 billion to $250 billion the threshold at which banks face stress tests and other rules. It also made community banks eligible for relief from mortgage-underwriting standards. The bill did not change the Consumer Financial Protection Bureau’s structure and oversight powers, the Financial Stability Oversight Council, or the Orderly Liquidation Authority to take over failing financial firms.[1][2]

During a signing ceremony, Trump said that the bill was the first step toward ending the regulations instituted under the 2010 law. As a candidate, Trump said that he would work to repeal and replace Dodd-Frank. Referring to the promise, he said, “We’ve kept a lot of promises. This is truly a great day for Americans, and a great day for workers and small businesses across the nation.”[3]

May 22, 2018: House bill to roll back some Dodd-Frank financial regulations to Trump’s desk

On May 22, 2018, the House passed S 2155—the Economic Growth, Regulatory Relief, and Consumer Protection Act—by a vote of 258-159. Thirty-three Democrats voted with 225 Republicans to pass the bill. Rep. Walter Jones (R-N.C.) was the only Republican who voted with 158 Democrats against the bill.[4]

Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee, praised the passage of the bill, saying, “We’ve been losing a community bank or credit union every other day in America, and with it the hopes and dreams of millions. But today, that changes. Help is on the way.”[5]

House Speaker Paul Ryan (R-Wis.) also praised the bill's passage, saying, “This is a major step forward in freeing our economy from overregulation."[6]

House Minority Leader Nancy Pelosi (D-Calif.) and House Financial Services Committee ranking Rep. Maxine Waters (D-Calif.) opposed the bill, writing in a letter to their colleagues, “The American people paid a very high price for the weak oversight and discriminatory lending practices that culminated in the 2008 financial crisis. We must not allow the GOP Congress to drag us back to the same lack of oversight that ignited the Great Recession.”[5]

According to The Wall Street Journal, House Republicans wanted to make more significant changes to the law but backed down from those demands after the Senate agreed to vote on a package of House-favored legislation.[6]

March 14, 2018: Senate passes bill to roll back Dodd-Frank financial regulations

On March 14, 2018, the Senate passed S 2155—the Economic Growth, Regulatory Relief, and Consumer Protection Act—by a vote of 67-31.[7][8][9]

Fifty Republicans, 16 Democrats, and Sen. Angus King (I-Maine) voted for the bill. Thirty Democrats and Sen. Bernie Sanders (I-Vt.) voted against the bill. Sens. Martin Heinrich (D-N.M.) and John McCain (R-Ariz.) did not vote.

The White House praised the passage of the bill in the following statement: "President Donald J. Trump commends the Senate, led by Chairman Mike Crapo (R-ID) for passing S.2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act. The President supports this bill, and as recently noted in a Statement of Administration Policy (SAP), he would sign it into law. The bill provides much-needed relief from the Dodd-Frank Act for thousands of community banks and credit unions and will spur lending and economic growth without creating risks to the financial system. By tailoring regulation, the bill seeks to prevent excessive regulation from undermining the viability of local and regional banks and their ability to serve their communities. The President looks forward to discussing any further revisions the House is interested in making, with the goal of bipartisan, pro-growth Dodd-Frank relief reaching his desk as soon as possible."[10]

House Republicans call for negotiations

After the bill passed, House Republicans called on members of the Senate to negotiate some provisions of the bill. House Financial Services Committee Chairman Jeb Hensarling (R-Texas) said, "We're not rubber-stamping the Senate bill. Their bill is staying on the Speaker's desk unless and until they're willing to negotiate with the House."[11]

In June 2017, the House passed HR 10—the Financial CHOICE Act of 2017—a bill sponsored by Hensarling. It proposed repealing about 40 provisions of the Dodd-Frank Act. House Republicans said that they wanted more of the provisions included in HR 10 to be included in the Senate's bill. According to The Hill, Republicans said that they wanted to include provisions that "are intended help small businesses raise capital by loosening securities laws and other financial rules" and "ease registration requirements for mergers and acquisitions brokers and independent investors," among other things.[11]

On May 8, 2018, Speaker of the House Paul Ryan (R-Wis.) said that the House and Senate had reached a deal on modifying the Dodd-Frank Act.[12]

Senators on the Economic Growth, Regulatory Relief, and Consumer Protection Act

Senators who supported the bill said that it would help small banks by exempting them from the 2010 financial rules and allow for more lending. Senators who opposed the bill said that it would bring back risk into the financial system and harm consumers.[13]

Support

  • Sen. Heidi Heitkamp (D-N.D.): "Passage of this bill is a big win for Main Street in rural America and our families, farmers, and small businesses."[9]
  • Sen. Jerry Moran (R-Kan.): "This is not about taking care of bankers. This is not about taking care of credit unions. It is about taking care of the people they serve – their borrowers."[9]
  • Sen. Mike Crapo (R-Idaho): “This bill has received widespread support for good reason: the cycle of lending and job creation has been stifled by onerous regulation."[13]

Opposition

  • Sen. Sherrod Brown (D-Ohio): "We missed an opportunity to pass meaningful bipartisan legislation that would help community banks and provide real protections for consumers."[9]
  • Rep. Maxine Waters (D-Calif.): "It takes our financial system in the wrong direction, and serves as a giveaway to banks that are already posting record profits."[9]
  • Sen. Elizabeth Warren (D-Mass.): "Senate Republicans voted unanimously for the #BankLobbyistAct. But this bill wouldn’t be on the path to becoming law without the support of these Democrats. The Senate just voted to increase the chances your money will be used to bail out big banks again.”[14]

October 24, 2017: Senate votes to end CFPB's consumer arbitration rule

On October 24, 2017, by a vote of 50-50, the Senate passed a joint resolution to nullify a rule submitted by the Consumer Financial Protection Bureau (CFPB) regarding arbitration agreements. Vice President Mike Pence, who cast the fifth tie-breaking vote of his vice-presidency, broke the tie. The CFPB’s rule would have prevented companies from including arbitration clauses in customer contracts that block customers from filing class-action lawsuits in the case of a dispute. It was set to go into effect in 2018.[15][16]

Republicans used the Congressional Review Act, which gives lawmakers 60 legislative days to repeal an executive branch rule after it has been finalized with a simple majority, to repeal the rule. Republican Sens. Lindsey Graham (S.C.) and John Kennedy (La.) voted with Democrats in opposition to the measure. On July 25, 2017, the House voted 231-190 to overturn the rule.[17]

Consumer Financial Protection Bureau Director Richard Cordray criticized the vote, saying, “Tonight’s vote is a giant setback for every consumer in this country. Wall Street won and ordinary people lost. This vote means the courtroom doors will remain closed for groups of people seeking justice and relief when they are wronged by a company.”[17]

Before the vote, Sen. Mike Crapo (R-Idaho), the chairman of the Senate Banking Committee, said, “This is a rule to benefit the plaintiffs bar."[17]

The Trump administration released the following statement praising the passage of the resolution:

“ President Donald J. Trump applauds the Congress for passing H.J. Res. 111, Disapproving of the Consumer Financial Protection Bureau's (CFPB) Arbitration Agreements Rule. According to a recent report by the Department of the Treasury, the evidence is clear that the CFPB's rule would neither protect consumers nor serve the public interest. Rather, under the rule, consumers would have fewer options for quickly and efficiently resolving financial disputes. Further, the rule would harm our community banks and credit unions by opening the door to frivolous lawsuits by special interest trial lawyers. By repealing this rule, Congress is standing up for everyday consumers and community banks and credit unions, instead of the trial lawyers, who would have benefited the most from the CFPB's uninformed and ineffective policy.[19] ”

President Donald Trump signed it into law on November 1, 2017.[20]

On November 15, 2017, Cordray announced he would step down as head of the CFPB by the end of November.[21]

June 8, 2017: House passes Financial CHOICE Act

On June 8, 2017, the House of Representatives passed HR 10—the Financial CHOICE Act of 2017. The bill proposed repealing about 40 provisions of the Dodd-Frank Act. The bill proposed allowing banks to not be subject to the heightened regulatory requirements of Dodd-Frank by maintaining a 10-1 ratio of capital over borrowed money to withstand a financial downturn. It also proposed granting the president power to fire the head of the Consumer Financial Protection Bureau (CFPB) and the Federal Housing Finance Agency at any time and without cause. It proposed granting Congress authority over the CFPB's budget. The bill also proposed repealing the Volcker Rule, a rule which prevents commercial banks from making speculative investments for their own profits.[22][23]

April 26, 2017: House holds hearing on the CHOICE Act

On April 26, 2017, the House Financial Services Committee debated a draft of the Financial CHOICE Act. The CHOICE Act, a bill sponsored by Rep. Jeb Hensarling (R-Texas), proposed repealing many of the provisions of the Dodd-Frank Act, limiting the power of the Financial Stability Oversight Council, and ending the Volcker Rule, which prohibited United States banks from making certain kinds of speculative investments that do not benefit their customers. The committee was divided along party lines. Democratic members of the committee petitioned to hold their own hearing on the bill before allowing it to come to a vote. The bill passed the committee on May 4, 2017, by a vote of 34-26.[24]

February 23, 2017: Hensarling warns Federal Reserve against passing new regulations

On February 23, 2017, House Financial Services Chairman Jeb Hensarling (R-Texas), along with 33 Republican lawmakers, sent a letter to Federal Reserve Chair Janet Yellen saying they were willing to use their authority under the Congressional Review Act to overturn regulations if the Fed did not pause rulemaking before the Senate confirmed a vice-chairman of banking supervision. The Congressional Review Act allows Congress, with the backing of the president, to block proposed regulations from regulatory authorities by a majority vote. The vice-chairman position had not been filled since its creation with the passage of the Dodd-Frank Act in 2010.[25]

Members of the 115th Congress on financial policy

  • December 14, 2016: Rep. Mark Meadows (R-N.C.), the chair of the conservative House Freedom Caucus, released a list of more than 200 rules and regulations that the coalition wanted Trump to replace, remove, or adopt in his first 100 days in office. Included in this list were the following recommendations:[27]
  • Remove 31 CFR § 150, which assesses a fee for some financial institutions supervised by the Federal Reserve to support the Financial Research Fund.
  • "Amend the Consumer Financial Protection Act of 2010 to require that no deference be given to the interpretation of consumer financial law by the Bureau of Consumer Financial Protection, to define the scope of judicial review of Bureau actions."
  • Remove home mortgage disclosure requirements for mortgage lenders in metropolitan areas regarding their housing-related lending activity.
  • End the Export-Import Bank.
  • November 22, 2016: Sen. Elizabeth Warren (D-Mass.) pledged to oppose any efforts to abolish the Consumer Financial Protection Bureau, the agency she innovated as a law professor to guarantee fairness and transparency in consumer financial services and products. “If they want to fight, it’s a fight they’ll get," Warren said in an interview.[28][29]

What is the Dodd-Frank Act?

The Dodd–Frank Wall Street Reform and Consumer Protection Act, also known as the Dodd-Frank Act, is a financial regulation law signed into law on July 21, 2010. The act was passed by the majority Democratic 111th Congress and signed into law by President Barack Obama.

The stated purpose of the law is "to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end 'too big to fail,' to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes." The Dodd-Frank Act provided for the creation or merger of various federal agencies. In addition, the law introduced changes to the nation's financial regulatory structure.[31]

Federal governmental regulation of the private financial sector is the source of debate. Some, such as the Brookings Institution, argue that increased governmental regulation of banks and financial products (e.g., mortgages) can prevent large-scale financial crises, protect consumers from abusive practices, and stabilize financial markets. Others, such as the Cato Institute, argue that over-regulation of banks and financial products burdens business, stalls economic growth, and does little—if anything—to stabilize financial markets. There are varying opinions about the proper extent of governmental regulation. Some argue for increased regulation, some for decreased regulation, and others still for no regulation.[32][33]

Background

The financial crisis of 2008, sometimes referred to as the Great Recession, launched the U.S. and the global economy into the most severe economic crisis since the Great Depression. Investopedia, an online financial encyclopedia, describes the recession as follows:[34]

“ During the American housing boom of the mid-2000s, financial institutions began marketing mortgage-backed securities (MBSs) and sophisticated derivative products at unprecedented levels. When the real estate market collapsed in 2007, these securities declined precipitously in value, jeopardizing the solvency of over-leveraged banks and financial institutions in the U.S. and Europe.

Although the global economy was already feeling the grip of a credit crisis that had been unfolding since 2007, things came to a head a year later with the bankruptcy of Lehman Brothers, the country’s fourth-largest investment bank, in September 2008. The contagion quickly spread to other economies around the world, most notably in Europe. As a result of the Great Recession, the U.S. alone shed more than 7.5 million jobs, causing its unemployment rate to double. Further, American households lost roughly $16 trillion of net worth as a result of the stock market plunge.[19]

”
—Investopedia

There are competing theories as to what led to the housing boom and bubble that spurred the recession of 2008. Some, such as Washington Post columnist Barry Ritholtz, blamed the banks for offering unaffordable loans to borrowers; others, such as Stanford economist and Reagan advisor John Taylor and Michael Bloomberg, blamed the federal government, arguing that government regulation mandated that these loans be offered. There is also debate about whether the repeal of the Glass-Steagall Act in 1999 contributed to the recession. In 2008, at the height of the crisis, U.S. gross domestic production growth slowed to 0.4 percent. The nation's unemployment rate spiked, hitting 10 percent in October 2009, the first time since June 1983.[35][36]

This period of stagnant growth and high unemployment lasted from December 2007 to June 2009. During this time, the federal government spent $700 billion via the Troubled Asset Relief Program (TARP), a program signed into law by President George W. Bush in 2008, in an attempt to support the failing financial system. Lawmakers and economists supporting TARP, such as Paul Krugman and Federal Reserve Chair Ben Bernanke, claimed that certain financial institutions, such as Citigroup and Wells Fargo, were too big to fail, meaning that the failure of these entities would threaten the entire financial system. Critics of the program, such as Sen. Elizabeth Warren (D-Mass.), referred to this program as a bailout, arguing that the program forced taxpayers to rescue, or bail out, a private industry.[37][38]

See also

External links

Footnotes

  1. ↑ The Wall Street Journal, "How Congress Rolled Back Banking Rules in a Rare Bipartisan Deal," May 23, 2018
  2. ↑ Congress.gov, "S.2155 - Economic Growth, Regulatory Relief, and Consumer Protection Act," accessed March 15, 2018
  3. ↑ The Hill, "Trump signs Dodd-Frank rollback," May 24, 2018
  4. ↑ Clerk.House.gov, "Final Vote Results for Roll Call 216," May 23, 2018
  5. ↑ 5.0 5.1 The Hill, "House votes to ease regulation of banks, sending bill to Trump," May 22, 2018
  6. ↑ 6.0 6.1 The Wall Street Journal, "Bank Deregulation Bill Clears Congress," May 22, 2018 Cite error: Invalid <ref> tag; name "dereg" defined multiple times with different content
  7. ↑ Senate.gov, "On Passage of the Bill (S. 2155, Amended)," March 14, 2018
  8. ↑ Congress.gov, "S.2155 - Economic Growth, Regulatory Relief, and Consumer Protection Act," accessed March 15, 2018
  9. ↑ 9.0 9.1 9.2 9.3 9.4 The Hill, "Overnight Finance," March 14, 2018
  10. ↑ WhiteHouse.gov, "Statement from the Press Secretary on the Passage of S.2155," March 14, 2018
  11. ↑ 11.0 11.1 The Hill, "Power struggle threatens to sink bank legislation," March 17, 2018
  12. ↑ The Hill, "Ryan: GOP has deal on bill easing Dodd-Frank," May 8, 2018
  13. ↑ 13.0 13.1 The Wall Street Journal, "Senate Passes Bill Easing Banking Rules," March 14, 2018
  14. ↑ The Hill, "Warren slams Dems for backing Dodd-Frank rollback," March 7, 2018
  15. ↑ Senate.gov, "On the Joint Resolution (H. J. Res. 111)," October 24, 2017
  16. ↑ ConsumerFinance.gov, "Arbitration agreements," accessed October 25, 2017
  17. ↑ 17.0 17.1 17.2 The Wall Street Journal, "Congress Makes It Harder to Sue the Financial Industry," October 24, 2017
  18. ↑ WhiteHouse.gov, "Statement Regarding Senate Passage of H.J. Res. 111," October 24, 2017
  19. ↑ 19.0 19.1 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
  20. ↑ WhiteHouse.gov, "President Donald J. Trump Signs H.J.Res. 111 into Law," November 1, 2017
  21. ↑ Washington Post, "Richard Cordray is stepping down as head of Consumer Financial Protection Bureau," November 15, 2017
  22. ↑ Washington Post, "House passes sweeping legislation to roll back banking rules," June 8, 2017
  23. ↑ Congress.gov, "H.R.10 - Financial CHOICE Act of 2017," March 26, 2017
  24. ↑ Bloomberg, "Republican Bid to Gut Dodd-Frank Renews the Debate About Breaking Up the Banks," accessed April 26, 2017
  25. ↑ Politico, "Hensarling warns Yellen against pushing new regulations," February 23, 2017
  26. ↑ U.S. Senate, "Sasse and Lee to Trump: Fire Cordray," January 9, 2017
  27. ↑ Congressman Mark Meadows, "Rep. Meadows Releases List of 200+ Harmful Regulations President-Elect Trump Can Overturn," December 14, 2016
  28. ↑ The Boston Globe, "Elizabeth Warren is ready to defend consumer agency," November 20, 2016
  29. ↑ Consumer Financial Protection Bureau, "The Bureau," accessed November 22, 2016
  30. ↑ Bloomberg, "Schumer Says He Can Block Trump’s Efforts to Repeal Dodd-Frank," November 20, 2016
  31. ↑ Government Publishing Office, "HR 4137," January 5, 2010
  32. ↑ Brookings, "The Origins of the Financial Crisis," November 24, 2008
  33. ↑ The Cato Institute, "Did Deregulation Cause the Financial Crisis?" July 2009
  34. ↑ Investopedia, "The Great Recession," accessed November 1, 2016
  35. ↑ Bureau of Labor Statistics, "The Recession of 2007–2009," February 2012
  36. ↑ The Atlantic, "It Wasn't Household Debt That Caused the Great Recession," May 21, 2014
  37. ↑ United States Treasury Department, "TARP Programs," January 13, 2016
  38. ↑ The New York Times, "If It’s Too Big to Fail, Is It Too Big to Exist?" June 20, 2009
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