While former FBI Director James Comey was stealing the news limelight with his Capitol Hill testimony Thursday, the House of Representatives quietly voted to undo one of the key pieces of legislation designed to prevent another financial crisis.
The Dodd-Frank Wall Street Reform and Consumer Protection Act — the law signed by former President Barack Obama in 2010 that was designed to prevent a repeat of the 2008 financial crisis — tightened regulations and oversight on the banking industry and led to the creation of the Consumer Financial Protection Bureau.
However, the House passed the GOP-sponsored Financial Choice Act by a vote of 233 to 186. The act would gut key elements of Dodd-Frank. Still, you shouldn’t expect the bill to become law anytime soon, according to the New York Times:
The vote is a significant step for a measure that still faces long odds of becoming law because of the slim majority that Republicans hold in the Senate. Even Wall Street lobbyists and lawyers were pessimistic about the chances of the bill.
Critics of Dodd-Frank have charged that at the very least, the legislation could use a few tweaks. And not all of the naysayers are on the political right.
In February, the Washington Post editorial board wrote that some aspects of Dodd-Frank deserved a second look:
Certain parts of Dodd-Frank, do, indeed, cry out for a fix. The measure may be unduly onerous on smaller banks that pose no real risk to overall financial stability. The Volcker rule, intended to force a clean break between commercial banks and their speculative “proprietary trading” desks, turned into page after page of impenetrable definitions and exceptions.
However, the paper also praised certain aspects of Dodd-Frank. It noted that the legislation had strengthened the nation’s banking system by boosting capital requirements at the largest banks, thereby creating a financial “cushion” should another crisis arise.
Many other critics say dismantling Dodd-Frank would rob the financial system of vital protections. Former Rep. Barney Frank himself — the Massachusetts Democrat who was one of the architects of the legislation that bears his name — has said killing Dodd-Frank could put the entire financial system in danger by allowing banks to take on too much debt and to engage in too many risks. Frank said:
“You would have what led to the 2008 crash. At some point, all of that unrepayable debt causes the system to crash.”
The GOP’s Financial Choice Act rescinds the CFPB’s jurisdiction over payday lenders. It would also give the president the power to fire the heads of the CFPB and the Federal Housing Finance Agency at any time, CNN Money reports. It also would give Congress control over the CFPB’s budget.
Consumer Financial Protection Bureau, a consumer watchdog agency created under Dodd-Frank, and the Federal Housing Finance Agency
A group of 20 attorneys general recently issued a letter to House leaders, urging them to vote against the Financial Choice Act, Consumerist reports.
“A rollback of these significant post-financial crisis rules and regulations would substantially harm consumers and the public in general,” the attorneys general concluded.
What do you think of the GOP’s plan to roll back Obama-era banking regulations and consumer protections? Sound off below or on Facebook.