A Republican alternative to President Obama’s Dodd-Frank financial reform law will be released soon, a top House lawmaker said Tuesday.
Jeb Hensarling, the chairman of the House Financial Services Committee, told a conference of bankers in Washington that “we are deep into our planning and you will soon see our bill.”
The Texas Republican also hinted at some of the major provisions the legislation would include.
Banks would be offered a choice, he suggested, between simplifying their business operations or meeting high capital requirements. Small banks that engage in the traditional business of taking deposits and making loans would face lower requirements. Big banks that engage in complex financial transactions would face higher capital requirements, and some would have to raise additional equity beyond what is required today, Hensarling suggested.
But for banks with high capital requirements, meaning they rely less on borrowing, “bankers ought to be allowed to be bankers,” Hensarling said, to applause from the American Bankers Association conference members.
That offer to allow banks a choice between high capital standards or simple business models mirrors a similar proposal floated by Thomas Hoenig, the vice chairman of the Federal Deposit Insurance Corporation viewed as a tough regulator. Hensarling, however, did not specify Tuesday what the criteria for avoiding the higher capital requirements would be, or how high the new capital standard would be.
The bill will contain simpler capital standards than those imposed today under Dodd-Frank and the international Basel accords, according to Hensarling. In addition, it will impose harsher penalties on financial fraud. A Federal Reserve reform bill already advanced by Hensarling’s panel will be part of it. New rules set by regulators will need to pass cost-benefit analysis, a test that the Obama administration and liberals have charged would halt the rulemaking process in many cases.
In a statement released early Tuesday afternoon, Hensarling’s Democratic counterpart on the Committee, Maxine Waters of California, denounced the proposals Hensarling outlined, calling them “just another attempt by the majority to gut” the new Wall Street rules. She called the as-yet-unreleased reforms “a reckless plan to tear down financial reform and to have Americans fend for themselves.”
The Financial Services Committee’s legislation is one of the major legislative proposals requested by House Speaker Paul Ryan ahead of the 2016 election to spell out Republicans’ agenda and what a GOP Congress would do with a Republican in the White House.
