Wall Street Rule Changes Will Be Slow in Senate

Back Bloomberg Feb 21, 2017 By Elizabeth Dexheimer

A key Republican Senator is casting doubt on hopes for quick action to dismantle the Dodd-Frank Act or overhaul the U.S. mortgage-finance system, citing the need for bipartisan support in a Congress that seems to be far from providing it.

The need to confirm President Donald Trump’s nominees, congressional rules on the time lawmakers have to debate legislation and bitter political battles will make it difficult to move any measure, says Senate Banking Committee Chairman, Mike Crapo. Crapo believes it might take at least 12 to 24 months to advance housing reform legislation, in particular, his spokeswoman says.

“The climate right now in the Senate is as toxic as I’ve ever seen it,” Crapo said at a Washington conference hosted on Feb. 15 by the Jones Walker law firm and the Mid-Size Bank Coalition of America. Confirming Trump’s appointees has been “a very slow process,” he says. “Much more slow than we have seen before, and that impacts everything else.”

Crapo’s caution offers a stark contrast with the optimism expressed by his House counterpart, Financial Services Committee Chairman Jeb Hensarling, who says he’s under the impression rolling back Dodd-Frank is a “this-year priority” for the White House and Congress. Hensarling, a Texas Republican, plans to introduce revised legislation as soon as this month to dramatically weaken the 2010 law and ease rules for banks.

Regulatory Review

Trump, who has called Dodd-Frank a “disaster,” signed an executive order earlier this month instructing regulators to examine financial rules and file a report on their findings, kicking off what the administration has promised will be a broad rewrite.

Numerous roadblocks remain before banks will see any relief from restrictions put in place after the 2008 credit crisis. Obama administration holdovers are still running most of the agencies that oversee financial firms and getting legislation through Congress is likely to require Democratic support in the Senate, because most major bills need 60 votes to pass and Republicans control only 52 of the body’s 100 seats.

Crapo acknowledged those hurdles last Wednesday and says he wants to craft legislation that at least some Democrats like. His top priorities include easing rules for community banks and freeing regional banks from some of the most stringent requirements applied to lenders with more than $50 billion in assets. He says he hopes to work with the Trump administration to develop a plan to overhaul mortgage giants Fannie Mae and Freddie Mac, which have been under U.S. control since they were seized by regulators amid soaring losses in 2008.

Basel Committee

Crapo says he also wants to review international banking capital standards set by the Basel Committee on Banking Supervision and improve transparency and accountability of the Financial Stability Oversight Council, a panel of regulators with authority to impose additional oversight on financial companies by labeling them systemically important. He declined to offer specifics on policies he’d like to pursue or a timeline for when he plans to introduce legislation.

Crapo says the Trump administration’s review of financial rules will help leaders in the Senate craft legislation. The president’s choices to fill financial posts, especially at the Federal Reserve, will be a “key factor” in identifying policies lawmakers can expect to see from the administration. U.S. bankers and their lobbyists have devoted much of their recent attention to the never-filled Fed role of vice chairman for supervision, which was created by Dodd-Frank.