The House voted Wednesday to change parts of the 2010 Dodd-Frank financial reform law, passing a package of 11 bills that was blocked by Democrats last week.
The House voted 271-154 to send the legislation to the Senate. Twenty-nine Democrats voted for the bill despite pressure from the left to oppose it.
Last week, enough Democrats banded together to stop the legislation, described as a bipartisan jobs bill by Republicans, when it was considered under a rule that required a two-thirds majority to pass.
On Tuesday, however, the bill passed despite a veto threat from the White House.
Whether the legislation advances in the Senate remains to be seen. The upper chamber has focused on legislation authorizing construction of the Keystone XL pipeline in the early weeks of 2015. Sen. Richard Shelby, the Alabama Republican who is chairman of the Senate Banking Committee, hasn’t weighed in on legislative priorities or an approach to Dodd-Frank, his office said.
The bill contains a measure that would delay the deadline by which banks would be required to sell off certain financial instruments known as collateralized loan obligations, or CLOs, which are essentially funds made up of business loans.
The Volcker Rule, a hotly contested provision of Dodd-Frank, requires banks with deposits insured by the Federal Deposit Insurance Corporation to stop trading for their own profit and to divest themselves of hedge funds.
Financial firms support delaying the implementation of the Volcker Rule for CLOs, which has already been done by regulators through 2017. The majority of CLOs are held by a handful of the biggest banks, although Republicans have said they are important for allowing small and mid-sized businesses to access credit.
“The latest CLO fix doesn’t even change the Volcker Rule at all,” said Tony Fratto, a partner at the communications firm Hamilton Place Strategies. “It just gives banks of all sizes more time to divest CLOs bought prior to the final Volcker Rule,” Fratto said in a note accompanying a defense of the legislation passed Tuesday.
Nevertheless, some House Democrats have argued that an additional two-year delay in the CLO rule is a substantive change in Dodd-Frank that weakens protections against taxpayer bailouts for banks’ benefit.
Liberal Democrats, including House Financial Services Committee ranking member Maxine Waters of California, also have objected to a provision that would reduce the required disclosures when companies pay employees in stock.
Part of the fight over the vote, however, stems from disagreements over process in the early days of the 114th Congress. Democrats objected to Republicans trying to move the bill again under a rule that didn’t allow for amendments and without allowing new members to discuss it at the committee level. Liberals have also warned about the possibility of minor tweaks and technical changes leading to the law getting stripped by Republicans later on.
Jeb Hensarling, the Republican chairman of the House Financial Services Committee, criticized Democrats’ opposition to Dodd-Frank changes on the House floor Wednesday.
The law has become an “article of religious faith” for Democrats, he said, comparing it to the 10 Commandments carved in stone.
The Texan also took a dig at Democrats for allowing liberals to lead moderates to vote against provisions that previously had cleared the House with overwhelming majorities.
“The left hand doesn’t know what the far left hand is doing,” Hensarling said of Democratic opposition. He also said that “Main Street doesn’t want to occupy Wall Street, they just want to quit bailing it out.”
During debate on the legislative package on Tuesday night, Hensarling’s Democratic counterpart on the committee, Maxine Waters of California, said that the bill “masquerades” as a technical fix to Dodd-Frank, but really makes substantive changes that increase the risk of taxpayer bailouts of banks.
She also took issue with Republicans’ description of Dodd-Frank as overly burdensome on banks and businesses.
“It’s not even a tough reform,” she said. “As a matter of fact, many of us consider it mild.”
