On May 4, GOP efforts to overhaul existing financial regulations took a step forward as the House Financial Services Committee approved H.R. 10, a revised version of the “Financial CHOICE Act of 2017” in a party-line vote, 34-26. The vote concluded a two week period that included both a three-day markup, of the GOP-backed legislation—during which several Democrat committee members sought, unsuccessfully, to remove various provisions of the bill—and, a two-day hearing that included testimony from 18 different witnesses.

  • An Executive Summary of the proposed legislation is available here.
  • A Comprehensive Summary of the proposed legislation is available here.
  • A copy of the Legislative Text of the proposed legislation is available here.

Originally introduced by Committee Chairman Jeb Hensarling (R-TX) in September 2016, the main focus of the CHOICE Act was to give financial institutions the option of avoiding many of the rules set up by the 2010 Dodd-Frank law if they maintain a high level of capital and are “well-managed” as defined in the bill. The legislation, if enacted, would also end the Dodd-Frank Act’s taxpayer-funded bailouts of large financial institutions and would impose greater penalties on those who commit fraud and insider trading, while also demanding greater accountability from banking regulators. A summary of changes incorporated in the latest iteration of the proposed legislation—recently referred to as “CHOICE Act 2.0”—was released by the Committee last week and included, among other things:

  • the elimination of the CFPB supervisory and examination authority;
  • a restructuring of the CFPB, FHFA, OCC, and FDIC into bipartisan commissions appointed by the President;
  • an opt-out of many regulatory requirements for banks and other financial institutions if they maintain a 10% leverage ratio (among other conditions);
  • subjecting the federal banking regulators to greater congressional oversight and tighter budgetary control;
  • reforms in bank stress tests;
  • materially reducing the authority of the Financial Stability Oversight Council (FSOC) and the establishment of a new process of identifying financial institutions as "systemically important";
  • a repeal of the Orderly Liquidation Authority and the creation of a new bankruptcy process for banks;
  • a repeal of the Volcker Rule; and
  • facilitated capital raising by small companies, including through crowd-funding.

Looking ahead, the House could vote to pass the bill later this month. While a party-line vote would pass the House, the bill will likely need to pick up a minimum of 60 votes—including support from several Democrats—in order for it to pass in the Senate.