WASHINGTON (AP) — Senate Republicans are trying to use a must-do spending bill to advance legislation significantly revising a landmark law that tightened regulation of the financial services industry after the 2008 financial crisis.
The measure approved Wednesday by a Senate panel would ease requirements on smaller banks and give lenders greater freedom from mortgage lending rules. The legislation is opposed by Democrats who argue that the 2010 Dodd-Frank law strengthened protections for consumers and reduced the odds for a repeat of the Great Recession following the 2008 financial meltdown.
The measure cleared the Banking Committee on a party-line vote two months ago and appears unlikely to pass the Senate soon. The underlying spending bill has a troubled path as well, since Democrats oppose its additional cuts to the IRS and other agencies.
"This bill tries to dismantle Wall Street reforms that have helped protect consumers and stop reckless risk-taking," said Sen. Chris Coons, D-Del.
The banking measure would lift the asset threshold for banks considered "too big to fail" from $50 billion to $500 billion, giving regulators flexibility to exempt them from tougher capital requirements and stricter oversight. It would also give mortgage lenders flexibility to avoid lending standards put in place after 2008, so long as they hold onto riskier loans rather than selling them.
The bill, authored by Banking Committee Chairman Richard Shelby, R-Ala., would also give lawmakers greater oversight powers over the Federal Reserve and force changes to the way the central bank produces a key report on its monetary policy moves. At the same time, the legislation would require the report to be submitted to Congress each quarter, instead of twice a year.
But it leaves untouched some of the biggest issues addressed by the 2010 law, such as trading in complex instruments known as derivatives and the powers of the Consumer Financial Protection Bureau, a new agency created by the measure that's had success in getting about $10 billion returned to 17 million consumers treated wrongly by financial services providers. The base spending measure, however, would dilute the power of the CFPB director and place its budget under direct control of Congress.
The banking language still goes too far for Democratic defenders of Dodd-Frank, which was passed when Democrats controlled Congress in the second year of President Barack Obama's tenure and is named after former Sen. Christopher Dodd, D-Conn., and Rep. Barney Frank, D-Mass.
Democrats are championing the law on its fifth anniversary but top GOP leaders haven't used the occasion to reprise their opposition to the law.
Sen. John Boozman of Arkansas, the chief GOP sponsor of the spending bill, praised it for protecting political groups from a potential IRS crackdown.
The spending measure is the last of 12 appropriations bills to be released and faces a vote in the full Appropriations Committee on Thursday. The measures, which finance more than $1 trillion for the Pentagon and domestic agency operations, are hung up in a battle between Democrats and Republicans over domestic spending.
Obama has promised to veto legislation that locks in tight agency budgets for a full year but there's been no bipartisan movement toward exploring ways to end the fight. A government shutdown appears unlikely in October, when the new fiscal year begins, but could occur near year's end if there's no deal.