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House Passes Bipartisan Deal to Roll Back Big Part of Dodd-Frank

House Passes Bipartisan Deal to Roll Back Big Part of Dodd-Frank

“Too big to fail had become too small to succeed.”

President Donald Trump promised big changes to Dodd-Frank shortly after his inauguration. He may have the opportunity to do just that this week.

In a rare instance of bipartisanship, the House passed a bill that will rollback portions of the financial law for smaller banks.

The Bill

From The New York Times:

The bill stops far short of unwinding the toughened regulatory regime put in place to prevent the nation’s biggest banks from engaging in risky behavior, but it represents a substantial watering down of Obama-era rules governing a large swath of the banking system. The legislation will leave fewer than 10 big banks in the United States subject to stricter federal oversight, freeing thousands of banks with less than $250 billion in assets from a post-crisis crackdown that they have long complained is too onerous.

Republican lawmakers and the banking industry cheered a measure they said would help unshackle banks — and the economy — from regulatory burdens.

Some parts of the bill “will have immediate effect,” but others need to have regulators “translate them into rules.” The Fed will seek “public input on a framework for deciding which firms with less than $250 billion in assets should get regulatory relief.”

Another provision excludes banks that have “fewer than 500 mortgages annually from having to report certain racial and income data on the loans, unless they perform poorly on tests lending discrimination.”

Smaller banks managed to “outfox” the bigger banks, as Reuters put it. They did so by concentrating “on asset-size limits, rather than by firm type or activities,” making it hard for the larger banks to find their way into the bill.

Speaker of the House Paul Ryan (R-WI) said that these “smaller banks are engines of growth” and when they lend “to smaller businesses” and provide “banking services for customers, these institutions are and will remain vital for millions of Americans who participate in our economy.”

How Small Banks Captured the Hearts of Some Democrats

Reuters reported that the small banks organized a grassroots operation to persuade Democrats to their side:

Armed with government data that showed the number of community lenders fell from around 8,400 in 2007 to around 5,500 today, they targeted moderates in states with many small banks but ideally no big players.

“This bill was perfectly crafted to allow greater flexibility for small community banks and credit unions…so it is purposeful that this bill does not include provisions for the largest banks,” North Dakota’s Senator Heidi Heitkamp, a key sponsor of the bill, told Reuters on Tuesday.

“The highest priorities for the largest institutions are nowhere to be found,” said Heitkamp, adding she would also not commit to further rule-easing to capital markets rules sought by banks.

Heitkamp had said that “[T]oo big to fail had become too small to succeed.”

It also helps that Heitkamp has a tough mid-term election ahead of her as the GOP eyes her seat in a state that overwhelmingly voted for Trump in 2016.

The same goes for Sen. Jon Tester (D-MT). Thanks to his support, the Montana Bankers Association created a video pushing voters to support Tester since “he put politics aside ‘to cut red tape.'”

[Featured image via Giorgio Galeotti [CC BY 3.0, via Wikimedia Commons]


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A welcome first step, but a small one. Not only does Dodd-Frank have to go, but so does Sarbanes-Oxley.

Halcyon Daze | May 23, 2018 at 2:53 pm

Research every bill Dodd, Frank, Biden, and McCain has ever sponsored and author some more rollbacks. Become Rollback Republicans.