Wall Street finally peeled off enough Senate Democrats to get major rollbacks of financial regulation one step closer to becoming law on Wednesday, when the Senate passed a bill to exempt dozens of banks from the Dodd-Frank reform law. But now it seems one key House Republican who’s pushed the industry’s wish list for years might, bizarrely, end up standing in the way.
Rep. Jeb Hensarling (TX), a longtime advocate for the most radical category of deregulatory policies possible after tighter rules passed in the wake of the 2008 financial crisis, said the Senate-passed bill is dead unless his colleagues agree to go even further.
Speaker Paul Ryan (R-WI) has promised that the Senate bill will “stay on his desk” unless the upper chamber is willing to incorporate some of Hensarling’s demands, the chairman told reporters Thursday.
“We’re not rubber-stamping the bill,” Hensarling said. “I would be happy to show them a copy of the Constitution.”
Hensarling’s gambit is bolder than it might sound. Republican lawmakers have been trying to get the major changes contained in the Senate bill through for almost a decade — basically ever since the Dodd-Frank reforms passed in 2010. Former Democratic Senate leader Harry Reid (D-NV) managed to stave off repeated attempts to sabotage and redraft Dodd-Frank in his final term in office. Now, 10 years to the week after Bear Stearns collapsed and kicked off the economic firestorm that destroyed generations of wealth for middle- and working-class families, the deregulation advocates seemed to have finally won.
Hensarling’s wishlist is long — his staff shared a list of 29 separate bills that have moved through the House containing various attacks on Dodd-Frank in recent years which he would like to negotiate over with Senate leaders — and far more controversial and dangerous than his public explanations of his position would suggest.
Though Hensarling has publicly pointed to a shorter list of bills that passed either near-unanimously and are broadly uncontroversial, his wishlist includes 29 items — several of which are far nastier pills for the economy to swallow.
The list includes the so-called TAILOR Act, which passed over 168 “no” votes from Democrats who say it would allow banks and other companies to tie up any regulation they don’t like in court indefinitely. Sixteen Dems voted with Hensarling on that sweeping assault on the regulatory infrastructure of the economy, but it’s a dramatic change to how much or little freedom private commerce has to duck the rules the government has set — and one nearly every Democrat in Congress opposes.
The list includes plenty of “tweeners” too — bills that had split the Democratic caucus, unlike the TAILOR act which nearly every Dem rejected or the unanimously-passed legislation Hensarling points to in the press. One such bill, the Mortgage Choice Act, would loosen the rules for what fees realtors have to disclose to home buyers. It got 52 “yes” votes from Democrats, but 131 “nos.”
But several of these can only be seen as poison pills.
One, known as the Protecting Consumers’ Access to Credit Act, is particularly duplicitous in its branding. It would gut state laws capping interest rates on consumer loans — exposing millions of people who are currently protected from payday loans to usurious predators. It doesn’t pass Hensarling’s bipartisanship smell test — 170 Democrats voted “no” compared to just 16 yeses — and is a bugbear for consumar advocates. The National Consumer Law Center called it “a massive attack on state consumer protection laws” that ” could open the floodgates to a wide range of predatory actors.”
Another, opposed by 130 House Democrats, would run directly opposite to the core premise of the Senate bill altogether. H.R. 3312 would shred the core concept of Dodd-Frank’s extra regulatory regime on megabanks. Where the Senate’s bad deal raises the definition of a bank that needs extra scrutiny from $50 billion to $250 billion in assets, 3312 would ditch the monetary definitions altogether in favor of a looser “risk-based assessment.” Nevermind that the Senate’s new threshold is bad policy — Hensarling’s wish-list includes a bill that would tear up the machinery of that policy entirely, deregulate banks with a combined $5.3 trillion in assets, and send this whole process back to the scrap-heap.
By pledging not to give the Senate bill a straight vote, Hensarling and Ryan are pressing an advantage they may not really hold.
The Senate bill is bad policy, lifting the size threshold at which Dodd-Frank’s core oversight provisions kick in such that only 12 banks would still be subject to the new safeguards. The Congressional Budget Office’s official scoring of the package said it would make a new crisis more likely. The bill even slashes new rules that combat housing discrimination and frees up the smallest banks to resume offering dangerous loan products, like adjustable-rate mortgages that helped inflate the bubble last time around.
Senate Banking Committee chair Mike Crapo (R-ID), the bill’s sponsor, nonetheless won over more than a dozen Democrats, breaking the blockade that Reid had worked so hard to maintain for years. Adding Hensarling’s additional demands could reset the process and require Crapo and Majority Leader Mitch McConnell (R-KY) to drum up Democratic votes for a bill that would be even more unpopular with the Democratic electorate.
It’s still possible Hensarling could pull it off, of course, since many large Democratic donors would likely support an even more aggressive withdrawal from Dodd-Frank’s reforms — but the wager here is that Democrats would put thumbs in their voters’ eyes again, and harder. As numerous analysts have observed, the sheer number of Democratic votes for the package suggests that Reid’s successor, Sen. Chuck Schumer (D-NY), tacitly approves of the Crapo bill, a reminder of the longstanding division within the Democratic party between stiff critics of banking abuses like Sen. Elizabeth Warren (D-MA) and conciliatory centrist types enamored of financiers who also happen to write them large campaign checks.
But the most obvious comparison is to the Obamacare repeal fight. There, ultra-conservative blocs inside the House majority made it even harder than it needed to be for leadership to pass something they could take to voters as evidence of promises kept on canceling the Affordable Care Act. Hensarling seems prepared to re-fight the same kind of war, all in the name of killing a watchdog group that’s clawed back billions of dollars for wronged consumers and exposed industrial-scale financial abuses against a rainbow coalition of working people, military families, and middle-class white-collar professionals.