iHouse Financial Services Committee Chairman Jeb Hensarling (R-TX) yesterday released his legislative plan to repeal and replace the Dodd-Frank Wall Street Reform and Consumer Protection Act, which passed a Democrat-led Congress and was signed into law in 2010.
Hensarling’s proposal, titled the Financial CHOICE Act, is unlikely to advance in this Congress due to staunch opposition from Democrats and the White House. Yet it represents a major policy proposal that may be revisited at least in part after the November elections depending upon Republican outcomes at the polls.
The comprehensive blueprint includes provisions designed to ease regulatory burdens on large institutions and community banks, and would implement significant changes at the Consumer Financial Protection Bureau (CFPB). The proposal’s chief details include:
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Grant banking institutions relief from Dodd-Frank oversight and Basel III capital and liquidity standards if they retain high levels of capital, and exempt these institutions from federal laws that limit some types of mergers, consolidations, or acquisitions. Hensarling in a speech yesterday clarified, “Most community banks will have to raise little to no additional capital”;
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Repeal the Financial Stability Oversight Council’s (FSOC's) authority to designate banks as systematically important financial institutions, and terminate the Volcker Rule;
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Provide regulatory relief for community banks by drawing upon more than two dozen regulatory relief bills from this Congress. These measures would require regulators to tailor regulations to an institution’s business model and risk profile, permit well-capitalized community banks to file some short-form call reports, and offer mortgage relief such as ability-to-repay safe harbor for loans held on portfolio;
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Rename the CFPB the Consumer Financial Opportunity Commission and restructure its leadership as a bipartisan, five-member commission subject to Congressional oversight and funding. The proposal would also establish an independent Inspector General over the agency and repeal its authority to ban “abusive” products or services and its jurisdiction over arbitration.
