Senate Republicans Take New Tack on Reining in Dodd-Frank

Fight over the impact of Dodd-Frank reforms shifts to federal financial spending bill.

Republicans are trying a new strategy for easing Dodd-Frank Act rules.

After seeking for months to win support from Democrats for Senator Richard Shelby’s legislation to narrow the reach of the 2010 law, Republicans on Wednesday added the measure to a broader bill that funds financial regulators.

The move, which came after little debate in a Senate subcommittee, probably will further anger Democrats who have argued that Shelby’s plan would roll back essential taxpayer protections put in place to prevent a repeat of the 2008 financial crisis. Senator Elizabeth Warren of Massachusetts slammed Republicans and bank lobbyists last year after they included an easing of derivatives rules in a spending bill.

"This tactic of using riders on must-pass legislation to chip away at crucial financial reforms is unacceptable." --Jacob Lew, U.S. Treasury Secretary“As I talk to my community bankers, they are losing community banks all the time because of the one-size-fits-all approach and the compliance costs,” Senator John Boozman, the Arkansas Republican who leads the appropriations panel, said after the vote. “This is just an attempt to use every tool that we’ve got in an effort to provide some relief.”

Shelby of Alabama, the Republican chairman of the banking panel, said his bill will help soften rules for regional and midsize lenders.

“I believe that there is a growing consensus that the community and regional financial institutions that fuel economic growth in our communities must get relief from unnecessary regulation,” Shelby said in a statement after the panel vote. “We must also take steps to improve accountability and transparency in the post Dodd-Frank world.”

The appropriations panel has scheduled a second hearing on the financial spending bill for Thursday.

The legislation calls for reining in the Consumer Financial Protection Bureau (CFPB) by giving lawmakers more power to set its budget and requiring that it be led by a five-member commission instead of a sole director. It also gives the Commodity Futures Trading Commission (CFTC), the main U.S. derivatives regulator, $72 million less than President Barack Obama’s budget seeks. The Securities and Exchange Commission (SEC) would get $222 million less.

The legislation could free SunTrust Banks Inc., U.S. Bancorp, PNC Financial Services Group Inc., and other banks from Dodd-Frank’s stiff supervision and capital requirements. It also would toughen oversight of the Federal Reserve and impose new requirements on the Financial Stability Oversight Council, the panel of regulators created by Dodd-Frank to monitor threats to the broader financial system.


Proposed Reforms to Financial Regulations ‘Reflect Amnesia’

‘‘I am troubled that this bill undermines critical and needed resources for financial regulators,” Senator Chris Coons, a Delaware Democrat, said at the hearing. “Nothing stands out as much as the ways this bill would make it harder for our country to prevent another financial crisis—a set of proposals I think reflect amnesia about the breadth and depth and impact of the financial crisis.”

Senator Sherrod Brown of Ohio, the Banking Committee’s top Democrat, has called the Shelby bill “a one-sided wish list” that isn’t written in a way that can win bipartisan support or an eventual signature from the president.

Treasury Secretary Jacob J. Lew on Monday said that the Obama administration would oppose efforts to remove Dodd-Frank regulations, especially through spending bills.

“This tactic of using riders on must-pass legislation to chip away at crucial financial reforms is unacceptable,” he said.

Senate Democrats have vowed to block this and all other funding bills from coming to the Senate floor in the absence of a budget deal. The committee move puts Dodd-Frank changes on the table when a likely catch-all omnibus spending bill is negotiated in the fall.


--With assistance from Matthew Philips in Washington.

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