Congress eases post-crisis bank rules in
victory for Trump
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[May 23, 2018]
By Pete Schroeder and Michelle Price
WASHINGTON (Reuters) - The U.S. House of
Representatives passed on Tuesday bipartisan legislation that would ease
bank rules introduced in the wake of the 2007-2009 financial crisis,
giving President Donald Trump a major legislative victory.
The vote eases some of the 2010 Dodd-Frank rules that have hurt smaller
banks and community lenders and keeps the Republican president's promise
to try to spur more economic growth by cutting regulation, but does
little for Wall Street.
It is a far cry from the repeal that Trump pledged on the campaign
trail, leaving largely untouched the core Dodd-Frank provisions designed
to ensure financial stability and other rules most hated by banks and
But industry lobbyists say Trump's administration played a key role in
getting the bipartisan legislation, which had been under discussion for
years, across the finish line.
The bill, which was approved by the Senate in March after securing the
backing of 17 Democrats, marks the first attempt to revise rules that
aimed to prevent a repeat of the crisis that saw Wall Street lenders
bailed out to the tune of $700 billion.
Republican critics say Dodd-Frank went too far and curbs banks' ability
to lend, hurting economic growth, while many Democrats say it provides
critical protections for consumers and taxpayers.
Speaking to reporters on Tuesday evening, White House officials hailed
the legislation as another "milestone" in the administration's mission
to "revitalize the U.S. economy" by lifting barriers to business.
They said Trump aims to sign the bill into law at a formal ceremony
within the week.
The bill, approved 258-159 in the House on Tuesday, raises the threshold
at which banks are considered systemically risky and subject to stricter
oversight to $250 billion from $50 billion. It also eases trading,
lending and capital rules for banks with less than $10 billion in
But it does not weaken the top U.S. consumer watchdog created by
Dodd-Frank that has been consistently attacked by Republicans who say it
oversteps its mandate.
Touching the Consumer Financial Protection Bureau was a red line for
Democrats, according to lobbyists.
Nor does the bill weaken Wall Street's obligation to comply with the
so-called Volcker Rule banning banks from making risky bets with their
own money, or limit the ability of regulators to apply stricter rules to
large institutions they deem critical to the financial system.
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Wall Street is written on a building in New York's financial
district, March 4, 2013. REUTERS/Brendan McDermid
Speaking to Reuters on Tuesday, Democratic U.S. Senator Heidi Heitkamp,
a key backer of the bill, said it aimed to fix problems with Dodd-Frank,
not to weaken it.
"That's going to improve Dodd-Frank not diminish or begin to erode
Dodd Frank," she added.
Still, some larger players secured a handful of niche provisions,
most notably the nation's largest custody banks.
The bill will allow the likes of BNY Mellon <BK.N>, State Street
Corp <STT.N> and Northern Trust to exclude customer deposits they
place with central banks from a stringent capital calculation
requirement, potentially offering major capital relief.
They were able to successfully differentiate themselves from the
Wall Street titans like Goldman Sachs Group Inc <GS.N>, Morgan
Stanley <MS.N> and JPMorgan Chase & Co <JPM.N>, in order to win over
some skeptical lawmakers, said lobbyists.
The draft legislation also offers more favorable treatment for
municipal bonds, a measure that analysts say is likely to help
Citigroup Inc's <C.N> bond-trading business and help lower financing
costs on infrastructure projects nationwide.
Consumer advocates and Democrats including Senator Elizabeth Warren
have warned big banks will exploit these provisions, potentially
increasing systemic risk.
But independent regulatory experts said the big banks were better
off focusing their efforts on the regulatory agencies where Trump's
appointees are better-positioned to cut them material slack.
"This is a legislative win for the banks, but the biggest
deregulatory bang for the buck is changing the referees, not the
rules," said Dan Ryan, PwC Banking & Capital Markets Leader.
"I don't see any more financial services bills passing the Senate
this year," he said.
(Reporting by Pete Schroeder and Michelle Price; Editing by Lisa
Shumaker and Darren Schuettler)
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