House Republicans voted Thursday to replace the 2010 Dodd-Frank law with their own sweeping financial regulatory measure, the Financial Choice Act.
The bill passed 233-186, with no Democratic support. One Republican, Walter Jones of North Carolina, voted no.
Authored by Rep. Jeb Hensarling of Texas, the conservative chairman of the House Financial Services Committee, the bill is perhaps second only to the healthcare legislation Republicans passed last month in its scope and significance. Like the healthcare bill, it would undo one of Obama's top legislative achievements, the new rules imposed on the financial sector in the wake of the 2008 financial crisis. Republicans justify the bill on the grounds that the regulations are holding down economic growth.
Previous acknowledgment that the bill could not survive a Democratic filibuster in the Senate muted some of the fanfare and controversy that otherwise would have accompanied its passage. The highly anticipated testimony from FBI Director James Comey on Thursday morning also overshadowed the vote.
Nevertheless, Hensarling said he hopes to negotiate with Senate Democrats on the measure and has expressed interest in moving specific pieces of it through the Senate and to President Trump's desk.
"Let's get this done for the people who take the risks, who live and breathe their work," House Speaker Paul Ryan said on the House floor.
A main feature of the legislation would be an offer to banks: If they maintain a significantly higher level of capital, they would receive additional regulatory relief — the choice for which the bill is named. Higher capital means less indebtedness and more funding through ownership stakes. The idea is that requiring higher capital would reduce the likelihood of a bank collapsing and also institute more market discipline because owners have more skin in the game.
No banks that had the levels of capital required by the bill failed during the crisis, noted Rep. Paul Mitchell, a Michigan freshman. For 18 months during the crisis, Mitchell recounted in explaining his support for the legislation, the career training business of which he was CEO didn't know if the megabank it relied on to make payroll would go bust, taking his company with it.
Aside from that provision, the bill would limit the new powers granted to regulators, eliminate the "Volcker Rule" preventing banks from speculating with deposits insured by the federal government, and dramatically scale back the role of the Consumer Financial Protection Bureau.
House Democrats expressed confidence Thursday that their counterparts in the Senate would block the Choice Act. Nevertheless, House Minority Leader Nancy Pelosi expressed concern that parts of the bill could pass separately. "The cumulative effect on the investor, on the taxpayer, on the consumer, will be the same, and it's not good," she said.
In recent weeks, Democrats have made sure to call the bill the "wrong choice act." They accused Republicans of trying to cut regulations to benefit banks, at the risk of allowing another crisis.
"This bill is a festival of bad choices, of wrong choices for America," Rep. Matt Cartwright, D-Pa., said on the House floor.
In the Senate, Banking Committee Chairman Mike Crapo has charted a different course. Rather than seeking to advance Republican legislation, he is working toward bipartisan compromises.
The Trump administration has waited to produce reports requested by President Trump before staking out policy preferences on financial reform. Nevertheless, the White House on Wednesday said that it supported House passage of the Choice Act in advancing the cause of regulatory relief.
"This is a huge part of regulatory reform," said Rep. Keith Rothfus, R-Pa., a member of the Financial Services Committee. "We had this paradigm over the last eight years that said Washington knew best about everything, and they could micromanage everything from what's in your health insurance plan, to what kind of mortgage or who's getting a mortgage, to what kind of energy you can have."
In general, financial industry groups supported the measure, or at least its advancement in the House, despite skepticism of some measures. In particular, some larger bank groups did not favor the changes that would be made to the Federal Reserve's monetary policy communications, as well as the high capital requirements, which outside analyses suggest would not benefit big banks.
"The House has taken the lead in efforts to modernize the financial regulatory system to advance the goal of boosting the economy without sacrificing important consumer and taxpayer protections," said Tim Pawlenty, head of the Financial Services Roundtable. "We look forward to working with Congress to get many of the provisions in the CHOICE Act to the President's desk."