U .S. House Of Representatives Votes To Defang Dodd-Frank

Jun 8 2017 | 11:19pm ET

In a largely symbolic move, the U.S. House of Representatives voted on Thursday to reverse key portions of the Dodd-Frank Wall Street Reform And Consumer Protection Act, delivering on one of the Republican Party’s core platform promises during last year’s presidential election.

The vote was 233 to 186 and went along party lines, according to Reuters. Authored by House Financial Services chairman Jeb Hensarling of Texas, the bill has little chance of survival in the Senate, where the support of at least some Democrats would be required. Nonetheless, it opens the door to rescinding or revamping many of the financial industry regulations instituted in the wake of the 2008-2009 financial crisis. 

Nicknamed the CHOICE Act, the bill rolls back the so-called Volcker rule, which limits proprietary trading by banks and the designation of non-bank financial institutions, such as insurance companies, as “systemically important,” a label that triggers greater oversight and stricter capital ratio requirements.

It also scales back the authority of the Consumer Financial Protection Bureau, a major consequence of Dodd Frank designed to guard consumers against abuses in lending and advertising for financial products.

Democrats are fiercely opposed to either weakening the CFPB or lowering any of the Obama-era restrictions on Wall Street firms aimed at preventing another crisis. House Republicans, meanwhile, believe Dodd Frank's regulations are stifling credit creation and impeding economic growth while placing undue regulatory burdens on institutions and preventing the efficient deployment of financial industry capital. 

The bill would also remove the fiduciary rule, scheduled to into affect this week, that adds tough new requirements for brokers and investment advisors to act in the best interests of their clients when dealing with retirement accounts.

Although repealing Dodd-Frank was a major element of President Trump’s campaign, the Senate is more likely to use the House passage more as a guideline, much like it is doing for health care, to develop its own version of financial deregulation. Early indications are that the Senate version may leave much of the Volcker rule intact while helping lift some of the regulations said to be hampering small- and medium-sized banks from lending. 

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