A divided House Financial Services Committee on Wednesday debated the pros and cons of a Republican proposal to replace much of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which the House may vote on May 5.
Democratic members of the committee opposed to the bill petitioned the committee to have their own hearing before a vote.
The proposed Financial CHOICE Act, whose chief sponsor is committee chairman Jeb Hensarling, R-Texas, would undo many of the regulatory reforms of Dodd-Frank, including those that burden smaller banks. It would limit the role of the Financial Stability Oversight Council in designating non-banks as systemically important and end the Volcker rule that bans banks from engaging in proprietary trading.
It would also require the Department of Labor's new fiduciary rule to wait for the Securities and Exchange Commission to produce its fiduciary standard first.
Ken Bertsch, executive director of the Council of Institutional Investors in Washington, said the proposal “would threaten prudent safeguards for oversight of companies and markets, including sensible reforms made in the wake of Enron and the financial crisis to close critical gaps in regulation. The new legislation is akin to removing seatbelts from cars — it's just too risky.”
Mr. Hensarling said the reforms were needed to spur economic recovery because “Dodd-Frank has been a greater burden to enterprise than all other Obama-era regulations combined.” While much of his criticism focused on consumer protections and small banking regulations, he said regulators also need to make financial firms more accountable and less reliant on Washington. To that end, the bill would prevent the FSOC from designating firms as systemically important, and to retroactively repeal previous designations.
Committee Democrats countered that easing Dodd-Frank regulations would benefit Wall Street firms more than consumers. “I have never seen so many bad ideas jammed into one bill,” Rep. Stephen Lynch, D-Mass., said at the hearing.
