The Financial Services Committee in the Republican-controlled House of Representatives laid the groundwork for a full-scale roll back of Obama’s Dodd-Frank. The House made its move on June 1st when it approved a bill to repeal significant parts of Dodd-Frank that put restrictions on Wall Street’s freedom of movement.
Originally, the Dodd-Frank Wall Street Reform and Consumer Protection Act put major regulatory controls of Wall Street’s financial maneuvers in the hands of government regulatory oversight. Dodd-Frank’s replacement bill, known as the CHOICE Act, was put forward by Texas Representative and House Chairman of the Financial Services Committee, Jeb Hensarling, on June 1st.
The vote was close at 34 approving to 26 disapproving the measure to repeal and replace Obama’s Wall Street regulations. Everyone on the Financial Services Committee voted on the bill and, unsurprising among a divided Congress, not one democrat voted with the Republican majority to support the regulatory overhaul.
Debates raged into the night for three days and republicans unrelentingly blocked amendments from House Financial Services Committee members from affixing amendments to the CHOICE Act. The CHOICE Act is undeniably a Republican creation, and republicans were loathe to allow democrats to insert amendments that would have safeguarded key components of Obama’s Dodd-Frank. The vote on June 1st went entirely down party lines.
Republicans have argued that Dodd-Frank has choked growth since its inception. Although the claim is difficult to prove, republicans also asset that Dodd-Frank has hamstrung the banks’ ability to extended credit and limiting choices across the board. Hence, the name: the CHOICE Act. Republicans are hoping to rectify the problems they see riddling the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The CHOICE Act would sidestep the problem of overleveraged banks by allowing banks that had enough liquidity and cash on hand to avoid the most onerous regulations enshrined in Dodd-Frank. Dodd-Frnak also demanded stress tests for the banks to be undertaken quite frequently whereas the CHOICE Act limits stress tests to every two years. Supporters of the CHOICE Act are delighted; critics of the CHOICE Act feel the economy could move more quickly and the systemic risk expand quicker than a stress test every two years could detect.
Democrats are worried that repealing most of Dodd-Frank’s biting regulations at once could deregulate the financial markets too quickly and have unforeseen negative effects on the economy. Republicans counter that the CHOICE Act will create growth.