By Dan Freed
NEW YORK (Reuters) - The chair of the U.S. House Financial Services Committee on Tuesday proposed wiping out much of the U.S. regulation put in place after the financial crisis with a plan expected to ignite debate in the presidential election but flame out in Washington.
In a sweeping speech at the Economic Club of New York, Republican Representative Jeb Hensarling, from Texas, laid out his ideas on weakening the 2010 Dodd-Frank Wall Street reform law just as polls opened in six states holding presidential primaries.
Hensarling told the crowd he had not yet consulted with Donald Trump, the presumptive Republican nominee, but would meet later in the day with the real-estate tycoon who is also pressing to dismantle the massive reform law.
Outside more than a dozen protesters chanted "Main Street not Wall Street" in opposition to Hensarling's plan.
The plan would allow banks to choose between complying with Dodd-Frank or holding a much higher amount of capital.
It would also throw out the Volcker Rule that restricts banks from making speculative investments and eliminate the authority of the Financial Stability Oversight Council consisting of regulatory agencies' heads to designate firms as "systemically important," also known as "too big to fail." That label triggers requirements to hold more capital and abide by stricter regulations.
Hensarling said his plan involved "far more loss-absorbing capital and far less federal control."
It would also leave the law's section on derivatives in place.
"I'm only replacing 89.7 percent of Dodd-Frank," Hensarling joked.
Few expect the plan, previewed in a video last week, to become law soon. While it could pass the Republican-controlled Congress, it would then have to be signed by President Barack Obama, who also signed Dodd-Frank into law.
But Obama leaves office in January and the people on the Democratic side vying to replace him, former Secretary of State Hillary Clinton and Senator Bernie Sanders, have distinct views on regulation and the lessons learned from the financial crisis.
"Those on the left who gave us Dodd-Frank believe in the principle that human nature is self-destructive and that people - except themselves, of course - are fundamentally ignorant," Hensarling said, demonstrating the political charge of his ideas.
Trump has given few clues to how he would take apart Dodd-Frank and what he might put in its place. His campaign declined to comment on Hensarling's plan. Last week Obama said Trump would let companies do "the same stuff that almost broke our economy’s back."
Meanwhile, Clinton has now secured enough votes for the top of the Democrats' ticket. She has proposed edging farther left of Dodd-Frank to break up large banks that take excessive risk, charge institutions a "risk fee," tax high-frequency trading, and create more oversight of "shadow banking."
The farthest left of the presidential contenders, Sanders wants to break up the largest banks, reinstate the Depression-era Glass-Steagall law that separated commercial and investment banking, and tax some speculation to pay for college tuition.
(Reporting by Dan Freed; Writing and additional reporting by Lisa Lambert; Editing by James Dalgleish)