While everyone was watching James Comey’s testimony on Thursday, House Republicans gave their colleagues in the Senate a major bargaining chip in their ongoing negotiations for financial reform.
The House passed the Financial CHOICE Act , which includes major reforms to the 2009 Dodd-Frank legislation, on a strict party line vote.
The Senate Banking Committee is considering legislation of its own. While the prospects for the CHOICE Act in the Senate are slim, it will likely provide an anchor for the committee’s chairman, Senator Mike Crapo, in his negotiations with the ranking member, Senator Sherrod Brown. Crapo encouraged the House to pass the bill while seeking a more bipartisan agreement in the Senate. The House version, a laundry list of conservative reforms, gives Crapo room to make concessions to Senate Democrats while still writing a bill that will please his own conference.
The first section of the House bill would repeal provisions of Dodd-Frank that created ways to identify and regulate “systemically important financial institutions,” a euphemism for banks considered “too big to fail.” Instead, the CHOICE Act creates a new category of bankruptcy specifically for large financial institutions, which, according to the House Financial Services Committee, “ends bailouts and … preserves the Rule of Law while enabling large, complex financial institutions to fail safely without making taxpayers foot the bill.”
The bill also imposes harsher penalties for financial crimes, especially fraud, by allowing the SEC to impose larger fines on individuals. Some of the fines collected by other financial administrators would be transferred to the Treasury for deficit reduction.
Most of the bill is concerned with deregulation, incorporating dozens of other bills aimed at revitalizing local and regional banks, which have suffered under Dodd-Frank. It also incorporates the Fed Oversight and Modernization Act, which subjects the Federal Reserve to greater congressional oversight on policies related to fiscal policy while maintaining its independence on monetary policy.
The Consumer Financial Protection Bureau, brainchild of Senator Elizabeth Warren, would be brought under closer control of the executive branch. For the first time, the agency would be funded by congressional appropriation, rather than directly from the Federal Reserve. (Only CFPB and IPAB, an agency created by Obamacare, have been funded this way.) The CHOICE Act also explicitly grants the president the power to remove the head of the CFPB for any reason.
The CFPB would be renamed the Consumer Law Enforcement Agency and would be given the dual mission of consumer protection and competitive markets. It would also, for the first time, include a Senate-confirmed inspector general to monitor its activities.
According to CNN, Crapo’s goal is to have the Senate pass it’s bill by early next year.
