The Senate debated a banking bill Thursday after GOP leaders added some further limits on regulators as well as consumer benefits to the legislation rolling back restraints on banks, as substantial support from Democrats helped edge the bill closer to passage.
The legislation before the Senate would alter key elements of the Dodd-Frank law enacted to prevent a repeat of the financial crisis 10 years ago that brought the economy to the edge of collapse. The bill has 13 Republican and 13 Democratic or independent co-sponsors, a rare level of bipartisanship for significant legislation in the current Congress. A final vote is expected early next week.
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At the bill's core is a five-fold increase, to $250 billion, in the level of assets at which banks are deemed so big and intertwined with the financial system that their failure could bring severe disruption. The change would ease regulations on more than two dozen financial companies, including BB&T Corp., Sun Trust Banks Inc. and American Express.
The measure's primary author, Senate Banking Committee Chairman Mike Crapo, R-Idaho, expanded it with some new provisions late Wednesday. They include limits on regulators' ability to curb banks' commercial real estate lending but also affirm the Federal Reserve's authority to closely oversee U.S. operations of big foreign banks.
Another provision would offer protections for student loan borrowers, banning lenders from declaring a borrower in default based on the bankruptcy or death of a co-signer. Lenders would be allowed to use alternatives to the dominant FICO system for determining consumers' credit scores.
With an eye to the massive Equifax data breach last year — the largest in U.S. history — the banking bill would provide for 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.
With Democratic senators split over the legislation, more liberal Democrats continued to attack it. "This bill is about laying the groundwork for the next financial crisis," Sen. Elizabeth Warren, D-Mass., one of the fiercest critics of Wall Street, said on the Senate floor. "Jobs will be lost, lives will be destroyed. The American people, not the banks, will once again bear the burden."
Several Democratic lawmakers facing tough re-election races this year, in states won by President Donald Trump in 2016, have broken ranks with Warren and Minority Leader Chuck Schumer, D-N.Y., to support the legislation.
The bill's proponents insist it would bring a needed boost to beleaguered banks outside Wall Street that didn't engage in the reckless practices that fueled the financial crisis. They are intent on easing those rules for midsize and large regional banks, asserting that would boost lending and the economy.
Banks have long complained about the cost of complying with the many requirements of Dodd-Frank. Under the Senate bill, some of the nation's biggest banks would no longer have to undergo an annual stress test conducted by the Federal Reserve. The test assesses whether a bank has enough capital to survive an economic shock and continue lending. Dozens of banks would also be exempted from making plans called "living wills" that spell out how the bank will sell off assets or be liquidated in a way that won't create chaos in the financial system.
By contrast, the bill passed by the House last summer to roll back Dodd-Frank restraints didn't garner a single Democratic vote in support. It is more sweeping and wide-ranging than the Senate bill. The two versions would have to be reconciled for final legislation to be enacted.