WASHINGTON – The Republican-led House has moved closer to fulfilling President Donald Trump's goal of doing "a big number" on Dodd-Frank, the landmark banking law created after the 2008 economic crisis that was designed to prevent future meltdowns.
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But the effort will likely require some major changes to bring about Democratic support in the Senate. Such support was missing entirely when the House voted 233-186 Thursday for a bill that would undo much of Dodd-Frank. House Republicans recognize the uphill climb, but were happy to chalk up a victory.
"Our families, small businesses and communities have been desperate for this change for years," said Rep. Steve Scalise, the House majority whip.
House passage was widely expected. Senators have said they'll spend the next few months trying to find common ground on legislation designed to boost the economy. Potential areas for compromise include changes to how much capital banks must maintain and decreasing the paperwork burden for small lenders.
Democratic Rep. Maxine Waters of California urged senators not to take up the House bill.
"They are setting the stage for Wall Street to run amok and cause another financial crisis," Waters said.
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The overhaul bill targets the heart of the Dodd-Frank law's restrictions on banks by offering a trade-off: Banks could qualify for most of the regulatory relief in the bill so long as they meet a strict requirement for building capital to cover unexpected big losses.
Democrats defended the Dodd-Frank law, saying it has meant financial security for millions of people and that undoing it would encourage the kind of risky lending practices that invite future economic shocks.
They also oppose efforts to sharply curtail a consumer protection agency's power to pursue companies that it determines have participated in unfair or deceptive practices in their financial products and services. The Consumer Financial Protection Bureau has returned $29 billion to 12 million consumers who were victims of deceptive marketing, discriminatory lending or other financial wrongdoing.
"All we're doing is spending our time taking away protections for the American people and their futures. Have we learned nothing?" asked Rep. Steny Hoyer, D-Md.
Several Democratic lawmakers insisted they were willing to make some changes to Dodd-Frank, but that the Republican bill went much too far.
"The bottom line is we put an end to the Wild West of Wall Street, and were on a nice, steady playing field," said Rep. Michael Capuano, D-Mass. "We should be able to adjust it, but we should not throw it out."
The bill would repeal a rule that bans banks from engaging in trading for their own profit using federally insured deposits, or forming certain relationships with private equity funds. It would roll back a proposed rule that investment advisers who collect commissions must put their clients' interests ahead of their own.
Also, financial regulators would lose the power to dismantle a failing financial firm and sell off the pieces if they decided its collapse could endanger the system. Instead, the bill would let banks fall under an expanded part of bankruptcy law.
The overhaul of Dodd-Frank was crafted by Rep. Jeb Hensarling of Texas, chairman of the House Financial Services Committee. Hensarling said that consumers have suffered as a result of Dodd-Frank.
"We see free checking cut in half at banks. Bank fees are up. The ranks of the unbanked have increased," he said. "For many credit-worthy borrowers, they are paying $500 more for an auto loan. Have you tried getting a mortgage recently? They're harder to come by and they cost hundreds of dollars more to close."
Trump started his attack on Dodd-Frank soon after taking office, ordering a Treasury Department review of the complex rules that have put the legislation into practice.
One part of that review is expected to be released soon. It could provide a blueprint for regulators to rewrite the rules. But it would take legislation to revamp the law — and that's far from a certain prospect.
The American Bankers Association applauded the House vote, saying the bill would "fix financial rules that are holding back the U.S. economy, and doing little to enhance safety and soundness." Consumers Union criticized the vote and called on the Senate to "reject this rollback of critical consumer protections." AARP also was among groups opposing the bill.
The Federal Reserve has described the U.S. banking system as much more robust and resilient than it was before the financial crisis. Stronger capital requirements have improved banks' capacity to absorb economic shocks. But in the push to overhaul Dodd-Frank, Republicans said the biggest banks have only gotten bigger while local banks and credit unions are dwindling.
Rep. Walter Jones of North Carolina was the only Republican to vote against the bill.