Politics & Government
Dodd-Frank: House Republicans Vote To Defang Financial Reform law
The Financial CHOICE Act would undo much of the bank regulation passed under President Obama.
WASHINGTON, DC — House Republicans voted along party lines Thursday to pass the Financial CHOICE Act, a bill that would greatly weaken the landmark Dodd-Frank financial reform law that was enacted after the 2008 financial crisis. Most observers believe the CHOICE Act faces major hurdles to pass the Senate, though some changes to Dodd-Frank may eventually make their way into law.
CEO Dan Berger of the National Association of Federally-Insured Credit Unions praised passage of the bill: "We appreciate members of the House and bill author Chairman Jeb Hensarling for recognizing the current regulatory burden facing credit unions, and look forward to working with the Senate to enact meaningful relief for our members."
However, critics of the CHOICE Act worry that rolling back Dodd-Frank risks the reemergence of many issues that led up to the financial crisis and recession. (For more information on this and other political stories, subscribe to the White House Patch for daily newsletters and breaking news alerts.)
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BREAKING: The House votes to roll back Dodd-Frank, sending the bill to the Senate https://t.co/croweYCKtM pic.twitter.com/6EW8LPL77A
— Bloomberg (@business) June 8, 2017
Dodd-Frank's major achievement was an increase in the amount of capital banks must hold at any given time. By requiring them to hold larger amounts of capital, regulators believe they can reduce the risk of bank failure down the line. Opponents of this approach argue that forcing banks to hold capital reduces the amount they can lend and thus slows valuable economic activity in the United States.
"It is clear that Republicans in the House would like to throw out the proverbial baby and the bathwater when it comes to the major legislative response to the worst financial crisis since the Great Depression," said Mark Hamrick, senior economic analyst of Bankrate.com. "Fortunately, there are two chambers which must weigh-in on the issue and the Senate will likely take a much more measured approach. That’s why we have a Senate.”
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He continued: “There are numerous aspects of Dodd-Frank which reasonable people can agree should be addressed or fine-tuned, including the need to reduce regulatory burdens on community banks. Unfortunately, by attempting to roll back steps aimed at reducing the risks of meltdowns among large financial institutions, like what was seen during the financial crisis, supporters of the legislation appear willing to put the broader economy at risk once again."
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