WASHINGTON • In a precursor to major fights over financial regulations during a Donald Trump presidency, the U.S. House voted Thursday to peel away one aspect of the regulations on banks passed in the wake of the financial crisis of 2008.
The change proposes to remove the $50 billion bank-size threshold for banks automatically covered under stringent oversight of the so-called Dodd-Frank financial regulations. It was sponsored by Rep. Blaine Luetkemeyer, R-St. Elizabeth, and passed the House, 254-161, with 20 Democrats voting for it.
Luetkemeyer said his bill removes onerous regulations that have cramped mid-sized and small banks’ abilities to lend to businesses and homeowners.
The original intent of the legislation was to more stringently regulate banks whose very size and “connectedness” to other financial institutions “would bring down the entire economy” if they failed, Luetkemeyer said.
But, he said, “these regulations have rolled downhill to small, mid-sized banks — unintended, but they are a consequence.”
Luetkemeyer said his legislation would simultaneously give regulators more tools to go after risky larger banks while taking away the arbitrary $50 billion size trigger.
But Democrats attacked Luetkemeyer’s bill as the vanguard of Trump-era attempts to peel back Dodd-Frank.
“We will live to regret this vote,” said Rep. Al Green, D-Texas.
The chances of Luetkemeyer’s bill passing the Senate with just days left in the current session are small, and it still could face a presidential veto from Democrat Barack Obama.
But that aside, Thursday’s debate was a warmup to what could be consequential legislative fights over financial regulations when total control of the federal government switches to Republicans in January.
Despite the bipartisan support, liberal Democrats pointed out that one of the 27 banks that could benefit from the changes in Luetkemeyer’s bill is that of Steven Mnuchin, Trump’s nominee for secretary of the Treasury.
The former Goldman Sachs partner and hedge fund manager led a group of investors that took over the failing IndyMac bank in 2008 with federal help. Mnuchin reportedly earned hundreds of millions from the deal.
Protesters picketed his home in Bel Air, Calif., on behalf of IndyMac foreclosed mortgage owners.
If Luetkemeyer’s bill becomes law and Mnuchin becomes Treasury secretary, “Mr. Mnuchin will now be in the driver’s seat to determine which banks get regulated, and how,” said Rep. Maxine Waters, D-Calif.
But Luetkemeyer and other defenders of his legislation pointed out that one of the authors of the original measure, former Rep. Barney Frank, D-Mass., while not a supporter of Luetkemeyer’s bill, has said the $50 billion trigger should be raised.
Luetkemeyer cited his own history as a banker and bank regulator in arguing that the failure of a $50 billion bank, while substantial, does not threaten the economy. Meanwhile, because of the “arbitrary” threshold of $50 billion, banks in that range of assets have been subjected to onerous regulations that have driven up the cost of lending to businesses and homeowners, he said.