Trump may already have a
plan ready to revamp Dodd-Frank
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[November 12, 2016]
By Lisa Lambert and Sarah N. Lynch
WASHINGTON
(Reuters) - When Jeb Hensarling, the Republican chair of the U.S. House
Financial Services Committee, released legislation this summer to weaken
the major financial law known as Dodd-Frank, many said it was a
pręt-a-porter plan that his party’s nominee, Donald Trump, could easily
adopt.
Now that Trump is president-elect, he appears to be doing just that.
Language about financial services posted on the Trump transition
website, www.greatagain.gov, echoes the tone of Hensarling's bill, known
as the CHOICE Act.
It calls Dodd-Frank, passed in the wake of the 2007-09 financial crisis
and recession, as “a sprawling and complex piece of legislation that has
unleashed hundreds of new rules and several new bureaucratic agencies”
and promises to dismantle and replace it with “new policies to encourage
economic growth and job creation.”
Hensarling’s legislation, which his committee approved in September,
also takes a replacement approach.
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The Texas Republican had unveiled his proposal in Trump's hometown of
New York in June, and then met with the businessman later in the day. At
the same time, Hensarling was mentioned as a possible Treasury secretary
by Trump's team. He has said he is not pursuing a Cabinet position.
"The CHOICE Act accurately reflects the priorities that President Trump
has placed on the Dodd-Frank problem," said J.W. Verret, an associate
professor at the George Mason University Antonin Scalia Law School and
financial regulation expert. Verret regularly meets with and briefs
members of Congress and the Securities and Exchange Commission on
financial regulation.
I think it is a great blueprint for everything that he has promised,"
said Verret, a former Republican congressional staffer.
The Hensarling blueprint would primarily allow banks to choose between
complying with Dodd-Frank or meeting tougher capital requirements -
primarily to maintain a ratio of tangible equity to leverage exposure of
10 percent.
It would also reorganize the Consumer Financial Protection Bureau, throw
out the Volcker Rule restricting banks from making speculative
investments and eliminate the authority of the Financial Stability
Oversight Council to designate non-banks as "systemically important."
It also differs from the Dodd-Frank legislation in the way it treats
insolvent banks. Hensarling says his approach will prevent taxpayer
dollars from being used to bail out failed institutions.
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![](../images/111216pics/busine67.jpg)
President-elect Donald Trump (2ndR) answers questions as his wife
Melania Trump and Senate Majority Leader Mitch McConnell (R-KY)
watch on Capitol Hill in Washington, U.S., November 10, 2016.
REUTERS/Joshua Roberts
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Alongside Obamacare, Dodd-Frank is considered one of Democratic
President Barack Obama's signature domestic policies.
The most senior Democrat on the Senate Banking Committee, Sherrod Brown,
has been a vocal defender of it, as has liberal firebrand Senator
Elizabeth Warren. That means a Dodd-Frank revamp could stall in one
chamber of Congress. Senate rules allow a single member to block a bill
from proceeding to a vote.
Trump said last May that he would dismantle Dodd-Frank, primarily
because the law makes it hard for banks to loan money.
But few have called for total demolition of it, with bank industry
sources privately saying they would like to see an easing of Dodd-Frank
rules.
Trump campaign adviser Anthony Scaramucci, a Wall Street financier, said
this week that the administration will review the law and "the worst
anti-business parts of it will be gutted."
Verret said he believes some components of the CHOICE Act will appeal to
the populist anger felt by Tea Party members and Trump supporters toward
big banks.
One such provision, he said, would place limits on how central banks can
lend to financial institutions in times of crisis, an in effort to
prevent future bailouts.
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This kind of reform, he added, appeals "to both populists and free
market thinkers at the same time."
(Reporting by Lisa Lambert and Sarah N. Lynch; editing by Linda Stern
and Jonathan Oatis)
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