House passes sweeping bank deregulation bill

House Republicans on Thursday united to pass a comprehensive bill that would dismantle the landmark banking regulations enacted after the 2008 financial crisis.

The legislation, approved by a vote of 233-186, represents the GOP’s opening salvo in the coming debate over easing the rules on the financial system, a move sparked by the election of President Donald Trump and Republican control of Congress.

For now, passage of the bill amounts to little more than a 600-page political messaging exercise, since Senate Republicans do not plan to take up the legislation as written. They’re beginning to put together their own package because enacting most changes to regulations will require winning over some Democrats.

The author of the bill, House Financial Services Chairman Jeb Hensarling (R-Texas), says he hopes parts of it will become law during this session of Congress. But he has also conceded that he’s playing the long game with some of his proposals, with high political hurdles looming in the Senate.

"My job is to put forth the best bill that we can put forth in the House. Then I’ve got to see what the Senate is able to do," Hensarling said Thursday. "We’ll look at every opportunity to get as much of the final Financial CHOICE Act on President Trump’s desk as is possible."

The legislation proposes a significant unwinding of the 2010 Dodd-Frank law, which imposed new regulations across the financial system in the wake of the 2008 meltdown.

Passage was a major victory for Hensarling, a fierce fiscal conservative who opposed the bank bailouts under the Bush administration and has led a crusade for years against Democrats’ response to the crisis.

Hensarling argues that the economy and consumers would benefit from his vision in which market forces rather than government regulation would keep the financial system in check.

Among the bill’s most controversial measures is the elimination of most of the powers of the Consumer Financial Protection Bureau, the independent regulatory agency that is Democrats’ crown jewel in Dodd-Frank.

The legislation would rename the weakened CFPB the "Consumer Law Enforcement Agency" and make it more beholden to Congress and the president.

The changes to the CFPB are unlikely to get traction among Senate Democrats. Veterans of Foreign Wars, a group with about 1.7 million members, initially planned this week to rally opposition against the CHOICE Act because of the proposal. But Hensarling made a last-minute pledge to try to allay their concerns.

The bill would also repeal a key pillar of Dodd-Frank that allows regulators to manage the failure of a major financial institution, replacing that power with an updated version of the bankruptcy code.

The unwinding of the CFPB and the bank failure backstop are two provisions that Republicans are considering jamming through the Senate over the opposition of Democrats, using a tool available as part of the budget-writing process that would require a simple majority vote.

At the heart of the legislation is a trade-off in which a bank would be able to escape a number of regulations if it agreed to comply with higher capital requirements.

Larger banks have shown little appetite to take up the offer, and Republicans have tried to promote the idea that Wall Street isn’t eager for the bill to become law.

Democrats say Hensarling’s bill is a recipe for another economic calamity, and they were unified in opposition to the legislation.

House Minority Leader Nancy Pelosi called it a "Wall Street-first bill that would drag us back to the days of the Great Recession."

But some Democrats have signaled there are parts of the bill they would like to work on outside of the most controversial provisions.

Rep. Brad Sherman (D-Calif.) said on the House floor Thursday that the legislation contained a dozen measures with "wide Democratic support."

"Unfortunately, they have been held hostage and added to a bill that contains a pharmacy of poison pills," he said.

Rep. Jim Himes (D-Conn.), chairman of the moderate New Democrat Coalition, said the capital trade-off Hensarling drafted was a "very interesting idea" but it was "surrounded by enough dangerous ideas" that lawmakers never had a real conversation about it.

"If there’s any discussion, for example, of what a size of a bank is before it becomes a systemic risk to the taxpayer, then let’s discuss what that number might be," Pelosi said. "But I really don’t know of any good thing that is in this bill."

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