House Republicans Unveil Proposed Dodd-Frank Rollback

Chris Gaetano
Published Date:
Apr 19, 2017
Change Ahead Road Sign

The chair of the House Financial Services Committee unveiled his party's plan for rolling back to the reforms made by the Dodd-Frank Act, which, among other things, gives the president far more discretion over regulatory agencies originally meant to be independent of the White House, according to CNN Money. It would give the president the ability to fire the head of the Consumer Financial Protection Bureau and the Federal Housing Finance Agency at will, while currently they can only be dismissed "for inefficiency, neglect of duty, or malfeasance in office."

Beyond the ability to dismiss the head, it would also give Congress the ability to set funding for the CFPB, possibly defunding it entirely, as well as replace the current single director with a five-member commission, establish an independent Inspector General for the agency, require the commission obtain permission before collecting personally identifiable information on consumers, repeal authority to ban bank products of services it deems abusive as well as its authority to prohibit arbitration, as well as repeal indirect auto lending guidance. The name of the agency, too, would be changed to the Consumer Financial Opportunity Commission, and would be tasked with the dual mission of consumer protection and competitive markets, with a cost-benefit analysis of rules performed by an Office of Economic Analysis.

It is not just the CFPB, however: the executive summary says financial regulatory agencies in general would be curtailed as a way to, according to the proposal, devolve power away from Washington. All financial regulatory agencies would be subject to a bill introduced this year called the REINS Act, which increases Congressional oversight on major regulatory changes. They would also be required to conduct across-the-board cost-benefit analysis of all proposed regulations, reauthorize the SEC with "funding, structural and enforcement reforms," institute due-process reforms for people who feel they have been the victim of a government shakedown, repeal the Chevron Defense doctrine, subject the Federal Reserve to the FORM Act, proposed legislation that (among many other things) subject the Federal Reserve to an annual audit by the GAO, and abolish the Office of Financial Research. 

Beyond this, the proposed bill would undo several other key measures from the Dodd-Frank Act. For instance, it would retroactively remove the authority of the Federal Stability Oversight Council (a body composed of the heads of the federal regulatory agencies) to designate certain financial institutions as systemically important or financial market utilities, both of which opens them up to further oversight and regulations. It would also repeal the Volcker Rule, which limits the amount of speculative investments banks can engage in. 

The proposal would also free up banks' actions so long as they have enough capital. Banks that make qualifying capital elections and maintain sufficient non-risk weighted leverage ratios would be exempt from the Dodd-Frank and Basel III supervisory regime. Such banks would also be exempt from "any federal law, rule, or regulation that provide limitations on mergers, consolidations, or acquisitions of assets or control, to the extent the limitations relate to capital or liquidity standards or concentrations of deposits or assets." They would also not need to consider "risk 'to the stabiltiy of the United States banking or financial system'" when reviewing an application to consumate a transaction or commence an activity. Further, they can conduct their own stress tests instead of having outside regulators do them. 

The proposed bill will also crack down on fraud. It increases the penalties for financial fraud and self-dealing, lets the SEC triple monetary fines sought in both administrative and civil actions where the penalties are tied to the defendant's illegal profits, and gives the SEC new authority to impose sanctions equal to investor losses in cases involving “fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement” where the loss or risk of loss is significant. Further, maximum criminal fines for individuals and firms engaging in insider trading and "other corrupt practices" would be increase. 

It would also make all fines collected by the Public Company Accounting Oversight Board and Municipal Securities Rulemaking Board be remitted to the Treasury for deficit reduction. 

Finally, the proposal would include the following bills: 

o H.R. 1090 – “Retail Investor Protection Act”
o H.R. 4168 – “Small Business Capital Formation Enhancement Act”
o H.R. 4498 – “Helping Angels Lead Our Startups Act”
o H.R. 5019 – “Fair Access to Investment Research Act”
o H.R. 1941 – “Financial Institutions Examination Fairness and Reform Act”
o H.R. 2896 – “Taking Account of Institutions with Low Operational Risk Act”
o H.R. 1210 – “Portfolio Lending and Mortgage Access Act”
o H.R. 766 – “Financial Institution Customer Protection Act”

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