The House of Representatives voted overwhelmingly Tuesday to approve a bipartisan legislative package of financial regulatory rollback measures, raising the prospect of Senate Democrats being asked to vote for a regulatory relief bill for a second time this year.
The legislation, labeled the JOBS Act 3.0, is a grab-bag of several dozen provisions, many meant to make it easier for startups to raise funds.
Brokered by House Financial Services Committee chairman Jeb Hensarling and the ranking committee Democrat Maxine Waters, the bill also would change some rules relating to banks and to the insurance system, and even have the federal government weigh in on cryptocurrencies.
Now, the bill is on to the Senate, where Hensarling was promised a vote in exchange for backing House passage this spring of the biggest revisions to the Dodd-Frank financial reform law since President Barack Obama signed that law in 2010.
“Now that the House has passed their bipartisan legislation to improve access to capital for communities across the country as they grow and create jobs, Senators will continue their ongoing bipartisan discussions as we work towards a vote in the coming months,” said Senate Majority Leader Mitch McConnell.
The White House press secretary issued a statement of support for the legislation, adding that the administration will look to make technical and “substantive” changes to it as it progresses in the Senate.
The question is whether Democrats are eager to take another vote to cut regulations on the financial sector, and under what conditions. The earlier bill was made possible by the support of 17 Senate Democrats, including several centrists on the Senate Banking Committee who are facing tough reelections in red states.
Several of those Democrats have expressed openness to considering a second bipartisan bill focused on capital markets. Jon Tester of Montana, though, said that he hadn’t yet reviewed the House measure. Joe Donnelly of Indiana said that the bill’s House backers hadn’t reached out to him to gauge support.
Mark Warner of Virginia, a key negotiator on the earlier package, said that he hadn’t looked yet at the bill, which was only formally unveiled Monday. He added, though, that he would want to include a measure to impose stiffer penalties on credit reporting agencies that mismanage consumer data, as Equifax did last year in its major breach.
Previously, those Democrats suffered criticism from liberals, including their colleague Elizabeth Warren of Massachusetts, in passing the first bill. Warren described it as a favor to big banks that would raise the risk of a financial crisis. Her office didn’t respond to a request for comment on the House bill.
One factor weighing in favor of Senate Democratic support for the JOBS Act 3.0 is the breadth of the Democratic support in the House. In particular, California’s Maxine Waters, the top Democrat on the Financial Services Committee, helped put together the package. Waters has aligned with Warren in recent battles over financial regulation, and opposed the bipartisan Senate bill that passed in May.
Speaking on the House floor Tuesday, Waters said she hoped that the Senate would pick it up and pass it. “Throughout my work on this legislation, I insisted that nothing could be included that would weaken Dodd-Frank’s financial reforms, harm consumers, or provide giveaways to Wall Street,” she explained.
Outside groups aligned with progressives had previously faulted some of the individual provisions, most of which already passed the Financial Services Committee or the House. But there was little outside pushback against the bill this week.
Senate Democrats running for reelection in red states have gained some advantage by backing regulatory relief. Bank groups, for instance, have come to the aid of Tester in Montana in appreciation for the bill he supported.
Tuesday’s bill includes some measures that relate to banks. One provision would have regulators move to a two-year cycle for requiring banks to write “living wills” spelling out how they would safely go bankrupt in case of a failure without endangering the rest of the financial system. Another would allow banks to help law enforcement track money launderers without facing penalties from regulators.
Insurers would also get help from the bill, in the form of a veto for Congress over any new rules on insurers that might stem from agreements reached among international groups of regulators.
But the bulk of the legislative package is aimed at making it easier for new companies to go public or for investors to stake small businesses.
One provision, for example, would allow more businesses to “test the waters” of going public without triggering securities regulations. Another would allow entrepreneurs to show off their companies at “demo days” without incurring restrictions.
The bill’s namesake, the JOBS Act of 2012 that eased several securities regulations, created the option of companies “crowdfunding” themselves. The JOBS Act 3.0 would expand that to more and bigger firms.
Other provisions would make it easier to invest in non-public companies, a goal that Tyler Gellasch, Executive Director of Healthy Markets Association, suggested could run counter to the larger goal of reversing the decline in initial public offerings. ”I suspect we won’t see an uptick in IPOs, but we will see greater costs and risks for investors as they are forced to chase opportunities into the private markets,” he said.
