Trump eager to sign bill rolling back banking regulations

WASHINGTON (AP)—President Donald Trump indicated May 23 that he’s eager to sign a bill that would dismantle a chunk of the rules framework for banks, installed to prevent recurrence of the 2008 financial crisis that brought millions of lost jobs and foreclosed homes.

The House voted 258 to 159 May 22 to approve legislation rolling back the Dodd-Frank law, notching a legislative win for Trump, who made gutting the landmark law a campaign promise.

The Republican-led legislation, pushed by Wall Street banks as well as regional banks and smaller institutions, garnered 33 votes from House Democrats. Similarly, the bill splintered Democrats into two camps when the Senate voted 67 to 31 to approve it in March.

“Big legislation will be signed by me shortly,” Trump tweeted. “Big changes to DODD FRANK.”

The bill raises the threshold at which banks are deemed so big and plugged into the financial grid that if one were to fail it would cause major havoc. Those banks are subject to stricter capital and planning requirements. Backers of the legislation are intent on loosening the restraints on them, asserting that would boost lending and the economy.

The banking industry lauded the changes.

“Today’s successful bipartisan House vote marks a turning point in the banking policy debate in this country,” Rob Nichols, American Bankers Association president and CEO, said in a statement. “For the first time in nearly a decade, lawmakers from both parties have chosen to right-size financial rules that were not working as intended and holding the economy back.

“There is certainly more to do to recalibrate regulations and tailor them based on a bank’s risk profile and business model, but the common-sense changes included in S.2155 will help America’s banks, particularly community banks, get back to the basics of lending to creditworthy borrowers and businesses.”

Independent Community Bankers of America President and CEO Rebeca Romero Rainey, said in a statement, “This hard-fought, long-awaited community bank regulatory relief legislation will put community banks in an enhanced position to foster local economic growth and prosperity. By unraveling some of the suffocating regulatory burdens community banks face, they are better able to unleash their full economic potential to the benefit of their customers and communities.

“ICBA thanks Congress for passing this crucial bipartisan bill, along with the thousands of community bankers, affiliated state associations and other industry allies who have fought for years for substantial regulatory relief that will strengthen economic growth, job creation, and consumer protection in local communities.”

The legislation is aimed at especially helping small and medium-sized banks, including community banks and credit unions. But critics argue that the likelihood of future taxpayer bailouts will be greater once it becomes law. They point to increases in banks’ lending and profits since Dodd-Frank’s enactment in 2010 as debunking the assertion that excessive regulation of the banking industry is stifling growth.

The Dodd-Frank act, named after its co-authors, Democratic Sen. Christopher Dodd of Connecticut and Democratic Rep. Barney Frank of Massachusetts, boosted government oversight of banks.

U.S. banks’ net income climbed to $56 billion in the January-March quarter, a 27.5 percent increase from a year earlier, as profits were revved up by the corporate tax cuts enacted late last year, the Federal Deposit Insurance Corp. reported.

“This is not a bill that benefits consumers. It is a big-bank bonanza,” Rep. Al Green, D-TX, said in debate on the House floor before the vote.

The bill makes a fivefold increase, to $250 billion, in the level of assets at which banks are deemed to pose a potential threat if they fail. The change would ease regulations and oversight on more than two-dozen financial institutions, including BB&T Corp., SunTrust Banks, Fifth Third Bancorp and American Express.

Eventually, the exempted banks will no longer have to undergo an annual stress test conducted by the Federal Reserve. The test assesses whether a bank has a big enough capital buffer to survive an economic shock and keep on lending. The banks also will be excused from submitting plans called “living wills” that spell out how a bank would sell off assets or be liquidated in the event of failure so it wouldn’t create chaos in the financial system.

Rep. Jeb Hensarling, R-TX, who heads the House Financial Services Committee, said Main Street banks “have been suffering for years under the weight” of the Dodd-Frank regulations. “Help is on the way,” Hensarling said. “Today is an important day in the history of economic opportunity in America.”

Rep. Frank Lucas, R-OK, a senior member of the House Financial Services Committee, said in a statement, “For several years, small financial institutions throughout Oklahoma have asked for regulatory relief from Dodd-Frank. I’m proud to support legislation that will roll back some of those burdens that are driving up costs for consumers and limiting access to capital. Passage of this bill is a major victory and first step toward bringing financial markets back to full efficiency and capacity.

“While I am happy to deliver positive news to small banks, credit unions and my constituents who rely upon on these institutions, I believe there is much more work to be done to unwind Dodd-Frank, expand capital investment, and restore economic opportunity in our country.”

Republican lawmakers, with Hensarling at the forefront, have been chafing at Dodd-Frank’s restrictions in the eight years since its enactment by President Barack Obama and Democrats in Congress, and finally prevailed with the vote.

The win on the banking bill adds to Trump’s marquee business-friendly legislative achievement, the sweeping tax bill enacted late last year that deeply cut taxes for corporations and wealthy individuals and offered more modest reductions for most ordinary Americans.

Supporters of the bill say Dodd-Frank was too blunt an instrument in response to the financial crisis, hurting smaller lenders that played no role in the debacle. They provide more than half of small business loans and over 80 percent of agricultural loans.

The legislation also exempts certain banks and credit unions from requirements to report some mortgage loan data. The exempted data includes the age of a loan applicant, credit score, total loan costs and interest rate. Critics say that would make it easier for banks to discriminate against minorities seeking home mortgages and go undetected.

In response to the Equifax breach that exposed personal information for more than 145 million Americans, the bill requires free credit freezes for all consumers affected by data breaches. Currently most states allow the credit reporting companies to charge consumers a fee for freezing their credit.

Backers of the legislation note that the Federal Reserve still will have the authority to apply tougher standards for banks with $100 billion to $250 billion in assets.

Just one Republican, Walter Jones, R-NC, cast a vote against the bill.

Senior Field Editor Larry Dreiling contributed to this report.