Dodd-Frank Re-Write—the House of Representatives Edition

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The House has approved major changes to signature aspects of Dodd-Frank. While those changes are unlikely to survive intact, they are certainly worthy of close attention. We’ve studied the nearly 600-page bill so you don’t have to.

On June 8, 2017, the House passed H.R. 10, entitled the Financial CHOICE Act of 2017. Sponsored by Rep. Jeb Hensarling (R-Texas), the bill advances to the Senate after a largely party-line vote, 233 to 186. All but one Republican supported the bill, while all Democrats opposed.

The bill extensively amends the Dodd-Frank Wall Street Reform and Consumer Protection Act, the landmark 2010 legislation passed by a Democrat-controlled Congress in the wake of the Lehman Brothers collapse and ensuing financial crisis.

Key changes include:

  • Overhaul of the Consumer Financial Protection Bureau: The independent bureau would be reconstituted as an executive-branch agency called the Consumer Law Enforcement Agency. The new bill eliminates or reduces oversight authority and exempts payday and car-title loans from regulation. Additionally, the President would have the power to replace the head of the agency at will, the new agency would be subject to the congressional appropriations process, and new rules promulgated by the agency would be subject to a cost-benefit analysis.
  • Repeal of the Volcker Rule: Commercial banks would no longer be subject to prohibitions on speculative for-profit trading, also called “proprietary” trading, or restrictions on ownership of hedge and private equity funds.
  • Repeal of the Fiduciary Duty Rule: Investment brokers would not be required to prioritize clients’ best interests when advising on retirement.
  • Repeal of the Orderly Liquidation Authority: The OLA provides a procedure for the government to wind down failing “systemically important” financial institutions to limit effects on the larger financial ecosystem. The new bill replaces this process with a new section of the Bankruptcy Code and removes the “systemically important” designation.
  • Creation of an “Off-Ramp”: Banks holding at least 10% of assets in capital would be largely exempted from Dodd-Frank’s heightened requirements, regardless of size.

Following passage by the House, President Trump tweeted his congratulations to Rep. Hensarling. However, the bill faces higher hurdles in the Senate, where Republicans hold 52 seats. It is not expected to be enacted in its current form.