GOP shares plan to dismantle Dodd-Frank law's reform of Wall Street
NEW YORK — Republicans on Tuesday introduced a broad plan to dismantle Wall Street reform passed in the wake of the 2008 financial crisis.
The proposal outlined by Rep. Jeb Hensarling, the Republican leader of the powerful House Financial Services Committee, would give large banks a way to avoid tough new regulations and eliminate the “Volcker Rule” that prevents banks from using their own money — not their clients' — to make risky bets.
The bill has almost no chance of passing Congress this year and was immediately denounced by advocacy groups. But the proposal is serving another important purpose: Setting the terms of a debate that is expected to rage next year on whether the country's banking system is strong enough to withstand another crisis without taxpayer bailouts.
The Republican plan takes aim at the 2010 Dodd-Frank financial reform package. Six years after it was passed, regulators are still putting in place thousands of pages of regulations. Banks say they have spent millions of dollars to comply with its new rules.
Republicans have argued that it amounts to a micromanaging of the financial system.
“Why has Dodd-Frank failed? Because Dodd-Frank rests upon faulty principle, faulty premise and faulty policy,” Hensarling, a Texas congressman, told the Economic Club of New York.
Hensarling met with presumptive Republican nominee Donald Trump on Tuesday to pitch the proposal, but it is unclear whether Trump, who has called for “dismantling” Dodd-Frank, will support the Republican approach.
“Dodd-Frank is a very negative force, which has developed a very bad name,” Trump told Reuters last month.
Congress is unlikely to take up such complex legislation before the presidential election, and President Obama would surely oppose any effort to weaken one of his signature accomplishments.
Also, Wall Street has shown more interest in reviewing the effect of the rules put in place than in adapting to a new set of regulations.
“We look forward to working with the committee and anyone who will help remove obstacles that make it harder for America's banks to serve their customers,” said James Ballentine, executive vice president of the American Bankers Association.
Under Henserling's plan, large banks could escape the new regulatory burdens by increasing the amount of capital they hold. To qualify, the country's largest banks would need to raise “several hundred billion dollars” to serve as a buffer during tough financial times, Hensarling said.
The proposal also calls for restructuring the Consumer Financial Protection Bureau and would remove some of its powers. Regulators also would lose the ability to designate some banks “too big to fail.”
Democrats and public advocates who have called for tougher regulation of Wall Street criticized the proposal.
Sen. Elizabeth Warren, D-Mass., in a Senate Banking committee hearing, called it the “wet kiss for Wall Street act.”
Hensarling, she said, thinks “the poor Wall Street banks have suffered too much under the new rules and it's time for them to return to the good old days before the 2008 crisis when these banks could run wild.”
A top adviser to Hillary Clinton called the proposal “ill-conceived.” It would “gut critical reforms put in place to protect the public after the financial crisis,” said Gary Gensler, former head of the Commodity Futures Trading Commission.