The US House of Representatives on Tuesday passed bipartisan legislation that would ease bank rules introduced in the wake of the 2007 to 2009 financial crisis, giving US President Donald Trump a major legislative victory.
The vote eases some of the 2010 Dodd-Frank rules that have hurt smaller banks and community lenders, and keeps the Republican US president’s promise to try to spur more economic growth by cutting regulation, but does little for Wall Street.
It is a far cry from the repeal that Trump pledged on the campaign trail, leaving largely untouched the core Dodd-Frank provisions designed to ensure financial stability and other rules most hated by banks and conservative Republicans.
However, industry lobbyists have said the Trump administration played a key role in getting the bipartisan legislation, which had been under discussion for years, across the finish line.
The bill, which was approved by the US Senate in March after securing the backing of 17 Democrats, marks the first attempt to revise rules that aimed to prevent a repeat of the crisis that saw Wall Street lenders bailed out to the tune of US$700 billion.
Republican critics have said Dodd-Frank went too far and curbs banks’ ability to lend, hurting economic growth, while many Democrats said it provides critical protections for consumers and taxpayers.
Speaking to reporters on Tuesday evening, White House officials hailed the legislation as another “milestone” in the administration’s mission to “revitalize the US economy” by lifting barriers to business.
They said Trump aims to sign the bill into law at a formal ceremony within the week.
The bill, approved 258-159 in the House, raises the threshold at which banks are considered systemically risky and subject to stricter oversight to US$250 billion from US$50 billion.
It also eases trading, lending and capital rules for banks with less than US$10 billion in assets.
However, it does not weaken the top US consumer watchdog created by Dodd-Frank that has been consistently attacked by Republicans who say it oversteps its mandate.
Touching the Consumer Financial Protection Bureau was a red line for Democrats, lobbyists said.
Nor does the bill weaken Wall Street’s obligation to comply with the so-called Volcker Rule banning banks from making risky bets with their own money, or limit the ability of regulators to apply stricter rules to large institutions they deem critical to the financial system.
Speaking to reporters on Tuesday, Democratic US Senator Heidi Heitkamp, a key backer of the bill, said it aimed to fix problems with Dodd-Frank, not to weaken it.
“That’s going to improve Dodd-Frank, not diminish or begin to erode Dodd Frank,” she added.
Still, some larger players secured a handful of niche provisions, most notably the US’ largest custody banks.
The bill would allow the likes of Bank of New York Mellon Corp, State Street Corp and Northern Trust Corp to exclude customer deposits they place with central banks from a stringent capital calculation requirement, potentially offering major capital relief.
They were able to successfully differentiate themselves from the Wall Street titans, such as Goldman Sachs Group Inc, Morgan Stanley and JPMorgan Chase & Co, to win over some skeptical lawmakers, lobbyists said.
The draft legislation also offers more favorable treatment for municipal bonds, a measure that analysts have said is likely to help Citigroup Inc’s bond-trading business and help lower financing costs on infrastructure projects nationwide.
Consumer advocates and Democrats, including US Senator Elizabeth Warren, have said big banks would exploit the provisions, potentially increasing systemic risk.
However, independent regulatory experts said the big banks were better off focusing their efforts on the regulatory agencies where Trump’s appointees are better-positioned to cut them material slack.
“This is a legislative win for the banks, but the biggest deregulatory bang for the buck is changing the referees, not the rules,” PricewaterhouseCoopers banking and capital markets leader Dan Ryan said.
“I don’t see any more financial services bills passing the Senate this year,” he said.
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