WASHINGTON (Reuters) - A House of Representatives panel on Tuesday approved a proposal to revamp the Dodd-Frank Wall Street reform law, after a hearing where lawmakers verbally tussled over rules enacted in the aftermath of the 2007-09 financial crisis.
The Financial Services Committee voted to send the bill, introduced this summer by committee chairman, Republican Jeb Hensarling, to the full House to consider. No Democrat on the committee voted for the measure, which would allow banks to choose between complying with Dodd-Frank or meeting tougher capital requirements.
It would also reorganize the Consumer Financial Protection Bureau (CFPB), a watchdog created through Dodd-Frank that last week penalized Wells Fargo for creating millions of fake accounts under customers’ names.
The 2010 Dodd-Frank law, passed in the wake of the financial crisis, has drawn the ire of most banks and Republicans in Congress. They have said Congress went too far in trying to clamp down on Wall Street and the law imposes burdensome requirements and gives regulators too much power.
The CPFB has been a particular target for Republicans, who do not like that it is governed by a single director and say it reaches beyond its authority in enforcement.
During the hearing, Democrats cited the Wells case, where the CFPB levied its largest-ever fine of $100 million, criticizing the panel’s Republican majority.
Democrats said that without Dodd-Frank the U.S. government would have had no tools to fight the widespread fraud, which led to the firing of 5,300 Wells employees.
“I am particularly disturbed that this bill would take away the Consumer Financial Protection Bureau’s ability to penalize companies for practices that are abusive to consumers,” said New York’s Carolyn Maloney, a Democrat, echoing many in her party. “The chairman’s bill, strips...from the CFPB its authority to punish abusive conduct, which means Wells Fargo would have gotten off even easier.”
Meanwhile, Randy Neugebauer, the Texas Republican who has advocated creating a five-member commission to govern the CFPB, said the bureau has not been politically neutral and is not transparent.
“I remain concerned that many bureau actions demonstrate regulatory paternalism that assumes the American consumer doesn’t know how to make choices for themselves,” he said at the hearing.
Corresponding legislation has not been introduced in the Senate, and Obama would be unlikely to sign the bill even both chambers of the Republican-led Congress passed it. Dodd-Frank is one of the Democratic president’s signature pieces of legislation.
Reporting by Lisa Lambert; Editing by Peter Cooney and David Gregorio