On Thursday, President Donald Trump signed a bill easing bank regulations for most banks, excluding the biggest names on the market. This is the most significant rollback on law regulations for these institutions since the global financial crisis. The reforms have made notable changes from the Dodd-Frank laws.
With both chambers of the Congress passing it, the bill has received bipartisan support. This procedure, however, has received mixed opinions, with supporters saying that it will take away unnecessary requirements for small and medium-sized banks and boost the economy, and opponents have highlighted that the bill could increase the chances for discrimination-based mortgage lending. Trump teased his decision to move forward the new reforms by tweeting “After many years, RIGHT TO TRY and big changes to DODD FRANK.” Before signing the bill, Trump stated that “a lot of great Democrats knew that it had to be done and they joined us in the effort” and that there should be more efforts from Congress to get to bipartisan decisions.
The new regulations include an increase on the threshold through which banks are deemed too important to the financial system to fail, going from 50$ billion to 250$ billion. Therefore, smaller institutions will undergo less pressure and won’t have to go through the procedures executed to avoid financial disaster, such as stress tests. However, some have argued that this could still end up supporting larger institutions, since supervision could now be more focused in banks with assets between 100$ billion and 250$ billion. The bill also a required process of reporting data for the wide majority of banks, requiring instead for credit reporting companies to offer their credit monitoring services for free, taking one more responsibility off from medium and small-sized banks.
Republicans had previously showed discomfort with the Dodd-Frank regulations, stating that they held down lending and economic growth. Two days prior to the bill’s signing, Paul Ryan referred to the bill as a benefit for community banks, stating that “This is a bill for the small banks that are the financial anchors of our communities. … It addresses some of Dodd-Frank’s biggest burdens to ease the regulatory costs on these small banks — costs which are ultimately transferred on to consumers.” However, left-leaning senators such as Bearnie Sanders, have expressed their opposition towards the bill, since it would leave liability on taxpayers if banks were to fail. The argument that the new bill would open the door for more discrimination-based lending by banks was highlighted by House Minority Leader Nancy Pelosi, who proceeded to state that “We should be taking steps to move forward, not making the situation worse.”
Rolling back on regulations has been a Republican priority since the Trump administration started, so their support for the new bill does not come as a surprise. The Democrats’ support, however, is quite a departure from their previous approach to bank-related regulations, since they have constantly supported the Dodd-Frank reforms. The bill received support from seventeen Democratic senators and thirty-three House Democrats, counting for a 258-159 margin of House votes and moving it forward through Congress. Still, some Republicans have expressed their belief that the regulations have not rolled-back enough, and advocate for a near complete removal of the Dodd-Frank regulations.
Senator Heidi Heitkamp expressed her excitement for this new reform pushing forward the mortgage lending business for community banks. She was the only Democrat who contributed writing and crafting the bill, and was invited to its signing. She remarked: “This is a great day for Main Street in rural America, and a big testament to what’s possible when members of Congress put partisanship aside and work together to help our communities grow and thrive”.
