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S. 2155: Economic Growth, Regulatory Relief, and Consumer Protection Act

Even some Democrats believe that the 2010 law passed in response to the Great Recession went too far and may have inadvertently punished smaller loaning and lending institutions.

The Economic Growth, Regulatory Relief, and Consumer Protection Actwould pare some of those rules back — and many red state and rural Democrats are on board.

Context

After the financial crash and Great Recession of 2008–09, a Democratically-controlled Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The bill tightened regulations on the financial institutions which most Democrats believed were primarily responsible for the crash.

The vote was largely party line: 98 percent of Senate Democrats in favor, 92 percent of Senate Republicans against.

However, most Republicans continue to — and even some red-state or rural Democrats have come to — believe some of the regulations were flawed. In particular, their biggest criticism is that the law made little to no distinction between the massive institutions which contributed to the crash versus the smaller or community-based banks and lenders which didn’t.

What the bill does

The legislation contains several provisions, among the most noteworthy:

  • Permits banks with between $50-$250 billion in assets to run with less regulatory oversight from the Financial Stability Oversight Council (FSOC).
  • Exempts banks with less than $10 billion in assets from some rules entirely, most notably the so-called Volcker Rule which bans banks from making some forms of speculative trades.
  • Requires the Federal Reserve to take size of banks into account when crafting regulations, rather than “one size fits all” regulations as critics contend the Fed has been doing for the past decade.
  • A loophole allowing huge foreign banks to avoid regulations by tallying their U.S. assets in ways that keep them under that $250 billion threshold. An amendment offered by Democrats to close the loophole was rejected.

Notably, the Senate bill has an exactly even mix of bipartisan cosponsors: 12 Republicans, 12 Democrats, and one independent. The Democrats hail almost entirely from more rural or red states, including Alabama, Colorado, Delaware, Indiana, Michigan, Missouri, Montana, North Dakota, Virginia, and West Virginia.

The bill was introduced on November 16 by Sen. Mike Crapo (R-ID), Chair of the Senate Banking Committee. It has been labelled as S. 2155.

What supporters say

Supporters argue that the bill reins in elements of a law which went too far and stifled businesses and economic growth with red tape.

“A strong and vibrant economy is important for American consumers, businesses, and the stability of the financial sector,” lead sponsor Crapo said in a press release. “This bipartisan legislation will significantly improve our financial regulatory framework and foster economic growth by right-sizing regulation, particularly for smaller financial institutions and community banks.”

Earlier this week, the White House also offered its official statement of support. “The bill is consistent with the Administration’s core principles for regulating the United States financial system,” the White House wrote in a Statement of Administration Policy. “Specifically, the bill would advance the principles of: (1) fostering economic growth; (2) making regulation efficient, effective, and appropriately tailored; and (3) empowering Americans to make independent financial decisions and informed choices in the marketplace.”

What opponents say

Opponents not surprisingly include former Rep. Barney Frank (D-MA4), partial namesake of the original Dodd-Frank financial regulation law from 2010.

“They [Republicans] insisted on raising the FSOC level to $250 billion, a level twice as high as is prudent. As I have noted before, the failure of two or three such institutions would put us in Lehman Brothers territory,” Frank wrote in a CNBC op-ed. “While I share the view… that responding to the concerns of small and midsized banks has both substantive and political arguments in its favor, I believe that the price the Republican colleagues are demanding is too high.”

Moreover, bank profits are currently at record levels, leading many to question whether their growth is truly being stifled as the bill’s advocates claimed.

Votes and odds of passage

A motion to invoke cloture, or a means to end debate and proceed to a possible up-or-down vote, passed by 67–32 on March 6. While not exact, this provides a good proxy for how the vote would likely break down now that the bill is expected to receive a vote by the full Senate in mid- to late March. Indeed, today, March 14, when the the Senate passed the bill the vote was 67–31.

Republicans were unanimously in favor 50–0 with Sen. John McCain (R-AZ) absent for health reasons. Democrats opposed 16–31, although that was still a sufficient amount of support to surpass the 3/5 overall support necessary in the Senate.

The bill had originally been voted in favor by the Senate Banking, Housing, and Urban Affairs Committee in December.

Last updated Mar 14, 2018. View all GovTrack summaries.

The summary below was written by the Congressional Research Service, which is a nonpartisan division of the Library of Congress, and was published on Dec 18, 2017.


Economic Growth, Regulatory Relief, and Consumer Protection Act

This bill amends the Truth in Lending Act to allow institutions with less than $10 billion in assets to waive ability-to-repay requirements for certain residential-mortgage loans. Other mortgage-lending provisions related to appraisals, mortgage data, licensing of loan originators, manufactured homes, escrow requirements, and transaction waiting periods are also modified.

The bill amends the Bank Holding Company Act of 1956 to exempt banks with assets valued at less than $10 billion from the "Volcker Rule," which prohibits banking agencies from engaging in proprietary trading or entering into certain relationships with hedge funds and private-equity funds. Certain banks are also exempted by the bill from specified capital and leverage ratios, with federal banking agencies directed to promulgate new requirements.

The bill amends the United States Housing Act of 1937 to reduce inspection requirements and environmental-review requirements for certain smaller, rural public-housing agencies.

Provisions relating to enhanced prudential regulation for financial institutions are modified, including those related to stress testing, leverage requirements, and the use of municipal bonds for purposes of meeting liquidity requirements.

The bill requires credit reporting agencies to provide credit-freeze alerts and includes consumer-credit provisions related to minors and veterans.

The bill amends the United States Housing Act of 1937 to revise the Family Self-Sufficiency (FSS) program, including provisions related to eligibility requirements, entities allowed to administer FSS programs, and the scope of supportive services.