Senate committee moves toward easing regulation of small banks

WASHINGTON — A Senate committee Tuesday moved toward approval of bipartisan legislation to ease regulations on smaller banks.

Supporters of the bill by Senate Banking Committee Chairman Michael Crapo, D-Idaho, including nine Democrats and one independent, called it a sensible step to reduce burdens, mostly on community banks and credit unions, to make it easier for consumers to get mortgages and obtain credit.

Critics complained that the bill goes too far in exempting about 30 large financial institutions from stricter oversight put in place after the 2008 financial crisis.

The bill’s most significant provision would reduce the number of financial institutions that face heightened scrutiny required by the 2010 Dodd-Frank Act.

The legislation would raise the threshold for so-called systemically important financial institutions, which face annual stress tests and other enhanced regulations, to $250 billion in assets from the current $50 billion level.

That would provide significant relief for large firms such as State Street Corp., Charles Schwab Corp., SunTrust Banks Inc., American Express Co. and the U.S. operations of giant foreign banks, including Credit Suisse, Deutsche Bank and Barclays.

There would be no changes to the strict oversight of JPMorgan Chase & Co., Bank of America Corp. Wells Fargo & Co. and the 10 other largest banks in the U.S.

The bill also would add new protections after the Equifax Inc. data breach, allowing consumers to freeze and unfreeze their files with credit reporting companies and requiring free credit monitoring for active-duty members of the military.

The goal of reducing regulations for smaller banks has broad support and Crapo worked with moderate Democrats to get enough on board to overcome the Senate’s 60-vote hurdle for most major legislation. Banking industry and business groups have indicated their support.

The Economic Growth, Regulatory Relief and Consumer Protection Act is much less ambitious than changes in the Dodd-Frank Act passed by the House on a party-line vote in June.

That bill, for example, would eliminate the designation of any financial institution as systemically important, scrap the trading restrictions known as the Volcker Rule and gut the authority of the Consumer Financial Protection Bureau.

The House bill is more in line with the aggressive deregulatory approach of President Donald Trump, who has called Dodd-Frank “a very negative force” in the economy and promised during his campaign last year dismantle it.

But strong Democratic opposition to major revisions in Dodd-Frank, one of the signature accomplishments of President Barack Obama, means the House bill is highly unlikely to pass the Senate.

Some Senate Republicans said they supported Crapo’s bill but wanted it to cut regulations further. Sen. Patrick Toomey, R-Pa., called it “mostly modest but constructive movement to lighten the burden of excessive and unnecessary regulation.”

He opposes the designation of financial institutions as systemically important. If the requirement is not repealed, Toomey said he’d prefer the designation be made case by case instead of being tied to an “arbitrary threshold.”

The bill’s limited reach led several moderate Democrats to sign on. They said the bipartisan process of drafting it was a stark contrast to the major tax bill approved last week by the Senate, which was written only by Republicans and received no Democratic votes.

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