US Senate Majority Leader Mitch McConnell has set the stage for a vote on one of the biggest rewrites of financial industry rules since the Dodd-Frank Act was passed nearly eight years ago.
McConnell filed a motion on Thursday to advance legislation sponsored by Senate Banking Committee chairman Mike Crapo that would bring regional banks and other financial firms regulatory relief that they've sought for years. The bill revises many parts of Dodd-Frank, including relieving smaller lenders from some of the strictest and most expensive post-crisis oversight.
The banking panel approved Crapo's bill with bipartisan support last year. The Idaho Republican told reporters Thursday that he is working on an amendment to incorporate changes passed by the House of Representatives. He said he has had discussions with Representative Jeb Hensarling, the Texas Republican who leads the House Financial Services Committee, about taking up the bill.
Moderate Democrats, particularly those facing tough re-election this year, were key to advancing the legislation. The Senate bill would raise to $250 billion from $50 billion the asset threshold for banks to be subjected to stricter Federal Reserve supervision for systemically important financial institutions.
But the Democratic approval is far from universal. Most Senate Democrats rejected Federal Reserve Board chairman Jerome Powell's assurances that the bipartisan bill offering relief from Dodd-Frank rules wouldn't loosen rules on foreign megabanks like Deutsche Bank and Santander.
During a Senate Banking Committee hearing, Powell told proponents of the bill, which is expected to be considered next week, that it wouldn't lessen Fed oversight of those global banks.
The possibility came up because the centrepiece of the bill is the loosening of some of the tougher Dodd-Frank requirements for banks with between $50 billion and $250 billion in assets, a provision meant to provide relief to regional banks like Suntrust or Fifth Third Bank that are large but quite different from Wall Street megabanks.
Senate liberals opposed to the bill, and some regulatory experts, have charged that global megabanks with US subsidiaries with under $250 billion in assets would also be spared from some of the toughest oversight measures required by Dodd-Frank.
Santander, for example, headquartered in Spain, is one of the largest banks in the world. But its US arm has only around $74 billion in assets.
The bill is the culmination of years of work to change Dodd-Frank. It doesn't go nearly as far as some Republicans would like to go in gutting the 2010 law. For example, it doesn't make big changes to the Consumer Financial Protection Bureau or repeal the Volcker Rule trading restrictions.
Shortly after the hearing concluded, a prominent Wall Street countered his testimony. Dennis Kelleher, head of the group Better Markets, said that the bill wouldn't require deregulating foreign-owned banks, but that such deregulation would happen anyway.
''The bottom line is that S. 2155 does not require the deregulation of foreign banks, but they will no doubt be deregulated, which will once again put U.S. taxpayers on the hook for bailouts of foreign banks rather than the taxpayers of those foreign countries," he said.