House passes bill aimed at overhauling Dodd-Frank law

The House approved legislation Thursday easing bank curbs that Democrats imposed to prevent another financial crisis, as Republicans offered a symbolic preview of regulatory changes they plan to pursue after President-elect Donald Trump takes office.

The GOP bill targets the landmark Dodd-Frank law, which President Barack Obama and Democrats enacted to rein in Wall Street following the financial crisis that struck in 2008. Trump urged during his campaign that the 2010 law be dismantled, and his transition team has set that as a goal.

The House measure has virtually no chance of passage by the lame-duck Congress, which could adjourn for the year next week. For good measure, the White House threatened a veto if it reaches Obama, telling lawmakers in a letter that the law has discouraged large banks from "engaging in the risky behavior that precipitated the 2008 financial crisis."

The bill cleared the House by 254-161.

Republicans, who overwhelmingly opposed Dodd-Frank, will control the White House and Congress in January and see an opening to go after key parts of the law — such as the Consumer Financial Protection Bureau.

"The No. 1 problem with Dodd-Frank is it's way too complicated and it cuts back lending," Steven Mnuchin, Trump's choice for Treasury secretary, said in an interview Wednesday with CNBC. "So we want to strip back parts of Dodd-Frank that prevent banks from lending."

The House legislation is portrayed by its backers as a potential boon to regional or large community banks that didn't contribute to the financial meltdown, as opposed to the Wall Street powerhouses.

Under the bill, banks with more than $50 billion in assets no longer would automatically be deemed by regulators as a potential threat to the financial system.

Rather, the Financial Stability Oversight Council — a group of top federal regulators — would be able to stick that label on banks on the basis of their size, how intertwined they are with the system, and other factors. Without the "systemically important" label, banks would escape requirements such as closer federal supervision and periodic tests of their ability to withstand severe economic downturns.

Those requirements have constrained the ability of the regional and large community banks currently under them "to support Main Street businesses in providing retail and commercial lending, as well as meeting the needs of local communities," the U.S. Chamber of Commerce said in a letter to House members.

In opposition, Rep. Maxine Waters of California, the senior Democrat on the Financial Services Committee, said on the House floor that the bill "would let President-elect Trump's Wall Street-friendly administration deregulate 27 of the largest banks in the country."

Waters suggested the legislation was a way of giving "a signing bonus" to Mnuchin, a former Wall Street executive and Hollywood financier, for joining the Trump administration. Mnuchin is on the board of CIT, a major bank which Waters said is one of the 27 that would benefit from the legislation if it became law.