WASHINGTON -- The Senate debated a banking bill Thursday after GOP leaders added some further limits on regulators as well as consumer benefits to the legislation rolling back restraints on banks, as substantial support from Democrats helped edge the bill closer to passage.
The legislation before the Senate would alter key elements of the Dodd-Frank law enacted to prevent a repeat of the financial crisis 10 years ago that brought the economy to the edge of collapse. The bill has 13 Republican and 13 Democratic or independent co-sponsors, a rare level of bipartisanship for significant legislation in the current Congress. A final vote is expected early next week.
At the bill's core is a fivefold increase, to $250 billion, in the level of assets at which banks are deemed so big and entwined with the financial system that their failure could bring severe disruption. The change would ease regulations on more than two dozen financial companies, including BB&T Corp., Sun Trust Banks Inc. and American Express.
The measure's primary author, Senate Banking Committee Chairman Mike Crapo, R-Idaho, expanded it with some new provisions late Wednesday. They include limits on regulators' ability to curb banks' commercial real estate lending but also affirm the Federal Reserve's authority to closely oversee U.S. operations of big foreign banks.
Another provision would offer protections for student loan borrowers, banning lenders from declaring a borrower in default based on the bankruptcy or death of a co-signer. Lenders would be allowed to use alternatives to the dominant FICO system for determining consumers' credit scores.
With an eye to the Equifax data breach last year -- the largest in U.S. history -- the banking bill would provide for free credit freezes for all consumers affected by data breaches. Currently most states allow the credit reporting companies to charge consumers a fee for freezing their credit.
With Democratic senators split over the legislation, more liberal Democrats continued to attack it. "This bill is about laying the groundwork for the next financial crisis," Sen. Elizabeth Warren, D-Mass., one of the fiercest critics of Wall Street, said on the Senate floor. "Jobs will be lost, lives will be destroyed. The American people, not the banks, will once again bear the burden."
Several Democratic lawmakers facing tough re-election races this year, in states won by President Donald Trump in 2016, have broken ranks with Warren and Minority Leader Charles Schumer, D-N.Y., to support the legislation.
The bill's proponents insist it would bring a needed boost to beleaguered banks outside Wall Street that didn't engage in the reckless practices that fueled the financial crisis. They are intent on easing those rules for midsize and large regional banks, asserting that would boost lending and the economy.
Banks have long complained about the cost of complying with the many requirements of Dodd-Frank. Under the Senate bill, some of the nation's biggest banks would no longer have to undergo an annual stress test conducted by the Federal Reserve. The test assesses whether a bank has enough capital to survive an economic shock and continue lending. Dozens of banks also would be exempt from making plans called "living wills" that spell out how the bank will sell off assets or be liquidated in a way that won't create chaos in the financial system.
By contrast, the bill passed by the House last summer to roll back Dodd-Frank restraints didn't garner a single Democratic vote in support. It is more sweeping and wide-ranging than the Senate bill. The two versions would have to be reconciled for final legislation to be enacted.
It remains to be seen whether Crapo's efforts will win the backing of House Republicans, who also must approve the bill for it to reach Trump's desk. If some House GOP members demand a more aggressive rollback, Senate Democrats could walk away, causing the legislation to fail.
In a sign of the tension that could come, House Financial Services Committee Chairman Jeb Hensarling, R-Texas, told reporters Thursday that Crapo's amendment doesn't provide the changes he wants to see.
Industry groups have been lobbying to persuade lawmakers to expand a provision in the initial Crapo bill on what's known as the supplemental leverage ratio, which forces Wall Street banks to maintain billions of dollars of capital to protect against losses.
The amendment Crapo released Wednesday indicates the campaign failed, as he left the language on the leverage ratio unchanged. That means custody banks such as Bank of New York Mellon and State Street that safeguard assets for the customers remain the only firms getting relief.
Still, the Fed is separately working to relax the capital requirement in a way that would benefit more lenders. The Congressional Budget Office estimated in a report earlier this week that there's a 50 percent chance that the Fed will relax the rule for Citigroup and JPMorgan Chase & Co. should Congress pass Crapo's bill.
For years, big banks such as Goldman Sachs have been trying to relax the Volcker Rule's ban on proprietary trading. While most of their focus has been on regulators, one change they've sought from lawmakers is reducing the number of agencies with authority over the rule. That, in turn, could make it easier to soften its impact. Crapo has declined to provide such relief in his legislation.
Information for this article was contributed by Elizabeth Dexheimer, Jesse Hamilton and Erik Wasson of Bloomberg News.
Business on 03/09/2018