Last week, as reported by The Wall Street Journal, POLITICO and others, the House voted for a sweeping rewrite of the Dodd-Frank Act. According to Politico, “The legislation, approved without a single Democratic vote, represents the GOP’s opening salvo in the debate over easing the rules on the financial system, a move sparked by the election of President Donald Trump and Republican control of Congress.”
Below are three takeaways on the CHOICE Act passage:
- There is a strong GOP push to significantly revise the rules governing Wall Street. In addition to the CHOICE Act, on Monday, June 12, the U.S. Department of the Treasury released its much anticipated financial regulatory reform report. This report stems from the President’s February 2017 Executive Order on “Core Principles for Regulating the U.S. Financial System” where the Secretary of the Treasury was to “identify any laws, treaties, regulations, guidance, reporting and record keeping requirements, and other Government policies that inhibit Federal regulation of the U.S. financial system in a manner consistent with the core principles.”
- The ball is now in the Senate’s court where Democrats have stronger minority influence. Although the Senate is also controlled by the GOP, the CHOICE Act will need Democratic support to avoid a filibuster. According to an article in Law360, “[T]he legislation has been universally panned by Democrats in the Senate, who are instead pushing for more-limited legislation aimed at helping community banks.” In addition, the Law360 article states, “Rep. Brad Sherman, D-Calif., said on the House floor that there were around a dozen pieces of the CHOICE Act that could be easily passed on a bipartisan basis if they were introduced in separate legislation. However, there were too many ‘poison pills’ in the CHOICE Act to garner any Democratic support.”
- Watch the regulatory agencies. Despite the challenges on the legislative front, the President’s newly-appointed leaders at the various federal regulators may be ramping up regulatory reform efforts in the second half of the year given the agencies, in general, have more flexibility to take action. For example, Appendix B of the Treasury report includes a list of all of Treasury’s recommendations within the report, including the recommended action and method of implementation (Congressional and/or regulatory action). Notably, the financial and consumer regulators (FRB, FDIC, OCC, SEC, CFTC and/or CFPB) take a prominent role in the reform implementation efforts, and many actions could be taken without Congress.