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House Poised To Roll Back Dodd-Frank Financial Reform

KELLY MCEVERS, HOST:

House Republicans are expected to vote next week on a bill to unravel Dodd-Frank. That's the massive set of Wall Street regulations that President Obama signed into law after the Great Recession. The Republicans' replacement is called the Financial Choice Act. As NPR's Geoff Bennett reports, it's led to a partisan debate about the government's role in the financial system.

GEOFF BENNETT, BYLINE: Republicans have promised to unravel the Dodd-Frank regulations ever since President Obama signed them into law back in 2010, but even this Democrat says it could use a fix.

BARNEY FRANK: My name is Barney Frank, and I was a member of the House. And I was chairman of the Financial Services Committee when the financial reform bill passed the House.

BENNETT: Frank says his namesake financial reform law has been too restrictive on smaller banks. And he says the threshold used to identify other banks as too big to fail - he says those should be higher.

FRANK: Beyond that, what you have are Republicans, including the chairman of the committee, Mr. Hensarling, who's a very honorable, very pleasant, deeply, rigidly ideological conservative who's essentially against any regulation.

BENNETT: The Mr. Hensarling Frank mentioned would be Congressman Jeb Hensarling. The Texas Republican chairs the House Financial Services Committee. The Financial Choice Act is his brainchild.

JEB HENSARLING: What you will find is a core principle of the Financial Choice Act is the tradeoff between simplicity and complexity and the tradeoff between bankruptcy and bailout.

BENNETT: The nearly 600 page bill de-fangs Dodd-Frank by repealing the so-called Volcker Rule which prevents government-insured banks from making risky bets with investments. And it rolls back a requirement that retirement advisers put their clients' interests ahead of their own.

Perhaps the biggest partisan flashpoint - the bill scales back the authority of the Consumer Financial Protection Bureau to regulate large banks and payday lenders. The CFPB was created under Dodd-Frank and designed to operate as an independent watchdog with a single director. Hensarling spoke at the right-leaning American Enterprise Institute last month, and he took issue with the agency structure.

(SOUNDBITE OF ARCHIVED RECORDING)

HENSARLING: To think in a democracy that one unelected individual can functionally decide what credit cards go in our wallets, what mortgages we can have on our home, whether or not we can even have a checking account - I mean that's just anathema to me and to the founding principles of this republic.

BENNETT: The banking industry's leading lobbyist says what they're looking for is flexibility. Rob Nichols is president and CEO of the American Bankers Association.

(SOUNDBITE OF ARCHIVED RECORDING)

ROB NICHOLS: We are not seeking to roll back, undo all of the policy response, all of Dodd-Frank. That's not our intention. Our intention is to acknowledge what many regulators and legislators will tell you both publicly and privately, which is aspects of Dodd-Frank overshot.

BENNETT: Even as some Democrats recognize there are problems with Dodd-Frank, they are unified against the GOP replacement bill. Congresswoman Maxine Waters is the top Democrat on the House Financial Services Committee. She says it's no surprise that Republicans see success in their sights.

MAXINE WATERS: With the majority that they have in the House, in the Senate and President Trump, this is their big opportunity to deregulate, deregulate, deregulate, and they're going to go for it.

BENNETT: But the GOP will run into some obstacles in the Senate since Republicans in the upper chamber don't have the 60 votes needed to pass the legislation. Hensarling says he's undeterred.

HENSARLING: If I live my life thinking that, oops, something might not pass the Senate, I would never even get up and bother to go to work.

BENNETT: Hensarling's playing the long game and trying to advance the debate. Geoff Bennett, NPR News, Washington.

(SOUNDBITE THE CINEMATIC ORCHESTRA'S "THE AWAKENING OF A WOMAN - BURNOUT") Transcript provided by NPR, Copyright NPR.

Corrected: June 2, 2017 at 12:00 AM EDT
This piece originally stated that the Financial CHOICE Act would eliminate caps on fees that retailers are charged for debit card transactions, but lawmakers have removed that provision from the original bill.

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