Republican plan would ease Wall St rules, as party embraces deregulation

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By Patrick Rucker | WASHINGTON

WASHINGTON The Republican chairman of a key
House of Representatives committee has laid out his plan to roll
back Wall Street rules and consumer protections conceived after
the 2008 financial crisis, a step that will largely define the
financial deregulation debate in the Trump era.

Jeb Hensarling, chairman of the Financial Services
Committee, outlined his legislation to clear away many rules
bankers say have hobbled investment and economic growth in a
staff memo seen by Reuters on Thursday.

The plan comes after President Donald Trump on Friday signed
a largely symbolic executive order that outlined an intention to
ease banking rules, which he and other critics of the Dodd-Frank
reform law passed after the financial crisis say hinder lending.

Under Hensarling’s plan, the largest U.S. banks would face
less oversight – though not as little as they had been hoping
for – while startups would have easier access to investors.

The plan would significantly dilute the powers of the
Consumer Financial Protection Bureau, which was created to help
guard individuals from fraud in mortgages, student loans and
other financial products but has drawn the wrath of Republicans.
Hensarling has called it a “rogue” agency.

Hensarling’s legislation, called the Financial Choice Act,
is likely to clear his own committee within a few weeks and
ultimately be passed by the full House. But it would require 60
votes in the Senate, where Republicans hold 52 seats and
Democrats defend the CFPB and many of the provisions House
Republicans would weaken.

On Thursday, the senior Democrat on the Senate Banking,
Housing and Urban Affairs Committee, Sherrod Brown, said he
would fight the Hensarling plan, saying it betrays “candidate
Trump’s campaign promises to hold Wall Street accountable and
help working Americans.”

Banking industry officials generally reacted positively,
though they conceded it was still early days in the process.

“It’s very aggressive and a very good starting point to
rolling back a lot of the rules and regulations,” said Paul
Merski of the Independent Community Bankers of America.

“If this were a football game we’d be in the first
quarter,” James Ballentine of the American Bankers Association
told Reuters.

NOT THE WHOLE BIG BANK WISH LIST

Hensarling’s primary approach is unchanged from the bill he
introduced last year. It would allow large banks to avoid some
oversight if they boost their capital reserves, or “leverage
ratio,” to 10 percent or better, which is seen as helping them
weather financial shocks.

Large banks have said the 10 percent level is too costly and
they would likely opt for existing rules.

Still, the Hensarling bill gives large banks some things
they would like. The stress tests banks undergo to prove to
regulators that they can withstand economic difficulties, now
performed annually, would only occur every other year.

The bill would also allow the president to remove the CFPB
director at will. Currently, the CFPB director is independent of
the president and is appointed to a fixed term.

Congressional Republicans including Hensarling have
indicated they would separately try to use the federal budget
process to starve the CFPB of funds, a strategy that would only
need 51 votes in the Senate.

Hensarling’s original bill would have erased the Volcker
rule, which limits bank’s ability to make some speculative
investments. The recent memo leaves that language unchanged.

Hensarling’s Choice Act envisions more hurdles for the
Securities and Exchange Commission and its enforcement work.

The bill would also ease rules that govern public companies,
including some accounting and investment controls. Credit rating
agencies would also get some regulatory relief.

Initial public offerings might be easier under Hensarling’s
bill. More companies, including the largest privately held ones,
could avoid tough disclosure requirements and be able to “test
the waters” with potential investors in advance of an offering. (Additional reporting by Amanda Becker, Sarah N. Lynch and Lisa
Lambert)



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