WASHINGTON (CN) — Taking a hatchet to financial regulations, the House of Representatives on Thursday passed a rollback of the Dodd-Frank Act and restructured the Consumer Financial Protection Bureau, Obama-era reforms enacted after the 2008 financial meltdown.
Only one Republican broke party lines Thursday in the 233-186 approval of the Financial Choice Act. It repeals many provisions of Dodd-Frank, including the Volcker Rule, which barred banks from making speculative trades on banks’ own accounts, using customers’ deposits.
The new law rebrands the Consumer Financial Protection Bureau as the Consumer Law Enforcement Agency and curtails many of the powers it was given by Dodd-Frank. It reduces the independence of the agency by having its director report to the president. The reduced agency would no long be able to write rules regulating consumer financial companies, such as debt collectors, without congressional approval. It would no longer be able to fine financial institutions for unfair or deceptive practices: powers it used last year to fine Wells Fargo Bank $100 million for opening 2 million accounts without telling its customers it was doing so.
Its prospects in the Senate are uncertain. Donald Trump campaigned on a promise to repeal Dodd-Frank and signed an executive order in April that started repeal without legislative action.
The Volcker Rule is named for Paul Volcker, president of the Federal Reserve under Presidents Jimmy Carter and Ronald Reagan. Volcker proposed the rule in 2009 as chairman of the Economic Recovery Advisory Board under President Barack Obama. Five former secretaries of the treasury endorsed it, and Congress enacted it in 2010 despite scathing criticism from banks. The rule did not devastate banks’ profits, as they had claimed it would. Democrats pointed out that banks reported record profits last year, despite the regulations.
From the House floor before the vote, Speaker of the House Paul Ryan reiterated the Republican Party’s core claims that Dodd-Frank regulations have stifled economic growth and hurt institutions like community banks that struggle to comply with its requirements.
“The Choice Act reins in Dodd-Frank and it delivers the regulatory relief these small banks so desperately need,” Ryan said. “This will change our communities because these banks are the lifeblood of our main streets.”
Ryan added in a tweet Thursday: “Dodd Frank is more than a thousand pages long and has more rules and regulations than any other Obama-era law.”
Democrats ripped the legislation, calling it a handout to big banks, not small one, and derisively referring to it as the Wrong Choice Act. Democrats say it will put take the reins off predatory lenders, who prey upon the poor, and return the nation to the dangers that precipitated the financial crisis.
“They have been handmaidens of the special interests – but even for them, when we have seen it all – this takes them to a new low,” House Minority Leader Nancy Pelosi said before the vote.
“They call it the Choice Act, but these are not the choices that the American people want; they are the choices of the Republican Party that puts Wall Street first.”
It’s the second repeal in the House of major Obama-era legislation, after repeal of the Patient Protection and Affordable Care Act. That victory for House Republicans stumbled in the Senate, and financial pundits on Thursday said that despite Republican control of the Senate, passage of the financial repeal was far from certain in the upper house, where extreme right-wing and Tea Party enthusiasts have not delivered the clout they have wielded in the lower house.
The Choice Act was introduced by Rep. Jeb Hensarling, R-Texas.
“All of the promises of Dodd-Frank were broken,” Hensarling said on the House floor Thursday. “They promised us it would lift the economy … but instead we are still stymied in the weakest, slowest recovery in the post war era. Have you tried to get a mortgage recently? They are hard to come by and cost hundreds of dollars more to close.”
On Thursday, the 30-year fixed-rate FHA mortgage was 4.375 percent, and the 30-year fixed-rate VA loan was 3.875 percent. The 15-year fixed-rate average was 3.375 percent, according to publicly available information.