Loan Officer | NMLS #238561
Branch NMLS #920781
Posted On May 29, 2018
Congressional Republicans may finally make good on Dodd-Frank reform with the passage of the Economic Growth, Regulatory Relief and Consumer Protection Act last week. On Thursday, President Trump signed the bill into law.
Supporters of the bill believe it will ease the regulatory burden small banks have faced since the aftermath of the Financial Crisis. Opponents of the bill claim deregulation is not a priority and the passage is poorly timed.
Here are five takeaways from the bill.
It eases regulations for some big banks.
Previously, the qualification for a “systematically important financial institution” to undergo the Federal Reserve’s stringent annual stress test was $50 billion in assets. The new bill increases that threshold to $250 billion in assets, so, the number of banks facing these tough tests will drop from 38 to 12.
But many regulations will stay the same.
Most Dodd-Frank Act legislation will stay the same. Co-author of the bill, former Congressman Barney Frank (D-MA), explained, “this is not a ‘big number’ on the bill. It’s a small number.” The Consumer Financial Protection Bureau, for example, will remain untouched.
It provides changes to the Volcker Rule.
Though the Volcker Rule attempts to curb reckless investment and proprietary trading, compliance with the rule can be costly, especially for smaller institutions. In the new bill, financial institutions with less than $10 billion in assets will be exempt from this rule.
Had some bipartisan support.
The bill passed through the House of Representatives with a vote of 258-159, including 33 Democrat votes. However, most Democrats, like Senator Elizabeth Warren (D-MA) are critical of the bill, especially the rollback of the Volcker Rule.
Consumers get the right to a free credit freeze.
After last year’s Equifax data breach, the bill gives consumers the right to free credit freezes. Currently, consumers have to pay fees to each credit-reporting agency to protect their personal information, and this varies from state to state.
Legislation enacted after the Financial Crisis has remained largely unchanged, nine years into economic recovery. Proponents of Dodd-Frank reform assert that changes are necessary to adapt to current economic conditions. Those who are against reform argue this legislation is necessary to prevent future economic problems. With this new bill, we see some changing and some maintaining of Dodd-Frank legislation.