‘This is the final product’: Reg relief backers resist changes to bill

WASHINGTON — A bipartisan Senate alliance working on a bank regulatory relief bill appeared even stronger Tuesday as it worked to minimize changes in the interest of moving the legislative package to the Senate floor.

The legislation, which passed the Senate Banking Committee 16-7, is the culmination of years of negotiations between moderate Democrats and Republicans on the panel. While the bill is not as ambitious as other relief proposals, it is the banking industry’s best prospect to roll back financial regulations since the Dodd-Frank financial reform law was passed in 2010.

Lawmakers supporting the bill made a pact not to agree to changes — even changes they favored — so they could keep the alliance intact. As a result, the panel made no substantive changes to the bill before it sending it to the full Senate.

Senator John Kennedy, a Republican from Louisiana, questions Richard Smith, former chairman and chief executive officer of Equifax, not pictured, during a Senate Banking Committee hearing in Washington.

“There are going to be some amendments today that I think have good merit. Very reluctantly I am going to have to vote against most if not all of them because I gave my word,” said Sen. John Kennedy, R-La. But he added there was no guarantee he would support the bill on the Senate floor since he wants stricter curbs on the credit reporting agencies.

Senate Banking Committee Chairman Mike Crapo, R-Idaho, said that with the legislation being a "bipartisan compromise," it wasn't going to please everyone. “None of us got everything,” he said.

Speaking to reporters, Crapo said the show of unity was "the same dynamic that was going through as negotiations occurred." He negotiated the final bill — which includes raising the asset threshold for "systemically important" banks from $50 billion to $250 billion, simplified capital requirements and a Volcker Rule exemption for small banks — with a core of moderate Democrats after his talks broke down with Sen. Sherrod Brown of Ohio, the committee's ranking Democrat who opposes the bill.

However, Crapo added that the bill could be changed before the full Senate votes.

“The Senators who support the bill are still very willing to negotiate and that includes those who are not on the committee and those who may not support the bill,” said Crapo.

Still, with the exception of some technical changes, the committee as a whole was uninterested in considering many amendments, including those proposed by progressive members who objected to the deal that was made between Republicans and four moderate Democrats on the panel.

“These amendments are offered in good faith,” said Sen. Elizabeth Warren, D-Mass. “I am very sorry to hear my colleagues say that deals cut behind closed doors” will stop them from voting for “good amendments.”

But members of Warren and Brown's party who supported the compromise held strong. Perhaps the strongest indicator of the commitment from Democrats supporting the deal was when Sen. Catherine Cortez Masto, D-Nev., introduced an amendment reinstating the Consumer Financial Protection Bureau's politically contentious arbitration rule. The four moderate Democrats who had cut the deal with Crapo — Joe Donnelly of Indiana, Heidi Heitkamp of North Dakota, Jon Tester of Montana and Mark Warner of Virginia — all voted against the amendment.

“We have been at this for five or six years and … this is the final product,” Tester of the overall bill.

Warner said, “I believe we are kind of at the breaking point” of what can be negotiated “and I will be voting down … many of those amendments.”

Some Republicans, despite supporting the package, said their preference was for more dramatic regulatory relief.

Sen. Pat Toomey, R-Pa., said, “I am going to support this [bill] because I think it certainly does more good than harm.”
However, Toomey said he wanted to work with other members on the panel to go further to ease regulations for big banks including changes to liquidity standards, capital requirements for large banks known as the "advanced approaches" and eliminating a numerical threshold for "systemically important" institutions.

“No one can seriously argue that a bank of $250 billion in assets is intrinsically more risky than a bank with $249 billion in assets,” said Toomey.

More progressive members on the panel said they opposed the bill because it did not go far enough to provide additional consumer protections.

“I support providing some relief to small banks and credit unions, but I think this bill unwisely chooses to do so by rolling back protections for people from the very activities that led to the crisis,” said Brown.

The biggest disagreement between Brown and Crapo appeared to be over changes to stress testing and giving Trump-appointed regulators more discretion.

“This language in the bill … is probably the biggest reason I oppose this bill. It is about stress testing” changes, said Brown.
“It repeals the stress tests for regional banks and leaves it to the recently installed regulators to come up with a replacement and think who those regulators are,” added Brown. He said he would have been more comfortable giving that authority to Federal Reserve Board Chair Janet Yellen and former Fed Gov. Dan Tarullo who were more supportive of stronger regulations. (Fed Gov. Jerome Powell has been nominated to succeed Yellen as chair.)

However, Crapo said, “I don’t share your distrust of the new members of the Fed board.”

The bill's support in the Senate appears to be expanding, making its full passage even more likely. During debate, Crapo indicated that Delaware Democrats Tom Carper and Chris Coons will both be joining 10 other Democrats and 10 Republicans that co-sponsored the legislation.

“You are going to have a filibuster proof majority for this bill on the floor,” said Sen. Brian Schatz, D-Hawaii, who opposed the legislation.

Under the bill, banks above the new proposed $250 asset threshold would still be subject to enhanced supervision under Dodd-Frank. Banks below the threshold would be released from that supervision unless the Federal Reserve separately designated them as risky.

The bill would also raise the asset threshold for banks to complete company-run stress tests, and require that such stress tests are conducted on a periodic, rather than semiannual, basis.

The bill would also simplify capital requirements for well-capitalized banks with assets of less than $10 billion, exempt such institutions from the Volcker Rule and give federal savings associations with assets below $15 billion more flexibility to operate as national banks. Banks with less than $5 billion in assets would be able to file shorter call reports.

Mortgages held on portfolio for banks and credit unions with less than $10 billion in assets would also meet the criteria of the CFPB’s “Qualified Mortgage” rule.

Banking panel members also expressed a desire to do more to regulate credit reporting agencies. The panel held a hearing with former Equifax Chief Executive Officer Richard Smith in October after the company revealed that a hack compromised the personal information of 143 million consumers.

“That’s one that is obviously going to get more discussion. Now whether that results in something on this bill or something in the future I think it is pretty clear there is an interest on both sides to find some further progress there,” Crapo told reporters.

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Regulatory relief Regulatory reform SIFIs Minimum capital requirements Volcker Rule Mike Crapo Sherrod Brown Elizabeth Warren
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