|
 Efforts by Republicans to revamp the 2010 Dodd-Frank Act,
including its handling of failing banks, went nowhere in the past
because the Democrat-controlled Senate defended the law.
A new push on the bank resolution issue would still face major
hurdles, including a likely veto from President Barack Obama, who
has vowed to protect the law, and opposition from the banking sector
itself.
But this year, Republicans control both houses of Congress, and they
hope to reduce the law's reach and rein in the Federal Reserve and
other powerful regulators. Some lawmakers who have pushed for
changes in how failed banks are administered, including Senator Pat
Toomey of Pennsylvania, have bigger leadership roles.
"We've been meeting every few weeks on the hope that we can produce
one, comprehensive product," a Republican aide to the Senate Banking
Committee told Reuters, adding that talks involved staff members in
the House and Senate.
 The segment of Dodd-Frank at issue is called Title II or the orderly
liquidation authority. It allows U.S. regulators to intervene to
manage the collapse of a systematically risky bank, insurer or other
major financial company to avoid a messy failure that spreads risk
to the broader financial system.
Republicans say this process would enable bailouts. They are aiming
to repeal that provision, limit the short-term loans the U.S.
Federal Reserve offers to firms desperate for cash, and make
bankruptcy the only option for failing banks.
That would set Republicans, who received more than 60 percent of
disclosed financial sector donations in the last congressional
election cycle and have historically represented Wall Street's
interests on Capitol Hill, at odds with the industry.
Wall Street banks worry that without an orderly liquidation plan in
place, markets would not be confident they could be cleanly wound
down in a crisis. Bankruptcy also would likely be a less forgiving
process for banks.
Several bank lobbyists told Reuters they were staying quiet for now,
while the issue mainly gets attention from lawmakers who are already
vocal on financial issues, such as Toomey and House Financial
Services Chairman Jeb Hensarling.
[to top of second column] |
It is not clear whether key leaders such as Senate Banking Committee
Chairman Richard Shelby, a Republican, would support the change.
Shelby, a longtime opponent of government bailouts, was against
Dodd-Frank but backed its bank-resolution provisions in 2010,
according to people involved at the time.
Because the bill under discussion involves changing the bankruptcy
code, it would also go to the Senate Judiciary Committee.
Representatives for Senator Chuck Grassley, who leads that panel,
and Shelby declined to comment.
"It's a long shot, but it's possible this year," the Senate aide
said.
Under Title II, the Federal Deposit Insurance Corp (FDIC) would have
access to a line of credit from the U.S. Treasury to keep certain
bank activities afloat until they can be sold off or wound down. The
industry would repay any taxpayer dollars spent in the process.
Republicans say this U.S. government involvement with failed
financial firms is a new form of bailout. But Democrats believe the
new powers protect the financial system.
"Something that restores the difficulties that we saw in 2008 and
2009 would not be healthy," Senator Jeff Merkley, an Oregon Democrat
on the banking committee, said in a conference call with reporters
last month.
(Editing by Soyoung Kim and Christian Plumb)
[© 2015 Thomson Reuters. All rights
reserved.]
Copyright 2015 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
