The full House of Representatives will now consider Rep. Jeb Hensarling's (R-Texas) legislative proposal to repeal the Dodd-Frank Consumer Protection and Wall Street Reform Act after it passed out of a committee.
The Financial CHOICE (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs) Act was introduced in July by Rep. Hensarling, the Chair of the House Financial Services Committee.
In addition to replacing Dodd-Frank, the 512-page H.R. 5983 would add a new section to the Bankruptcy Code specific to large financial institutions, allow banks to use a 10 percent leverage ratio, prevent the Financial Stability Oversight Council from designating nonbank firms (such as insurance companies) as systemically important financial institutions subject to heightened supervision, and cap the fraud penalties imposed by the Securities and Exchange Commission.
The bill would "end too big to fail once and for all and assure that these companies are subject to bankruptcy, not bailout," Rep. Hensarling said in prepared remarks prior to a vote on the measure, calling it "a better way" than Dodd-Frank. "It replaces taxpayer funds with loss-absorbing private capital—far more capital than either Dodd-Frank or Basel requires. And it substitutes market discipline for government control."
If enacted, the bill would effect a full repeal of the Volcker Rule and have a significant impact on the Consumer Financial Protection Bureau (CFPB), changing the structure of the agency to a five-member commission (with an accompanying tweak to its name to the "Consumer Financial Opportunity Commission") funded through the appropriations process. The new Commission would be required to verify consumer complaint information before making it publicly available, use the notice and comment process for any proposed guidance, and establish a procedure for issuing written advisory opinions.
The bill passed the Financial Services Committee along almost uniform party lines, with just one Republican breaking ranks to vote against the measure in a final count of 30 to 26. Democrats elected to take a hands-off approach to the proposal by not proposing any amendments or changes and instead simply voted against it.
To read the Financial CHOICE Act, click here.
Why it matters
With a Democrat in the White House, enactment is obviously unlikely. That said, some expect the bill to provide a model for future legislation in a possible Trump administration. Rep. Hensarling is no stranger to legislative proposals circumscribing the CFPB's authority and reining in Dodd-Frank, having supported bills that would repeal Bureau guidance with regard to both auto lending and mortgage lending.