On Thursday, the U.S. House of Representatives passed a bill rolling back most parts of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which set up consumer protections and banking oversight in the wake of the 2008 financial disaster that led to a global economic recession.
Dubbed the Financial Choice Act, the bill is the centerpiece of Republican promises to scrap regulations on the finance industry. It now heads to the Senate, which is working on its own version of the legislation.
U.S. Rep. Andy Barr, whose central Kentucky district includes Lexington, voted in favor of the bill, which he says rolls back “unnecessary regulatory overreaches.”
“This legislation would provide much-needed relief so that individuals, families and entrepreneurs can access the capital they need to invest in homes and small businesses,” Barr said in a statement. “It will also hold Wall Street accountable by ending bailouts and imposing the toughest penalties in history for fraud and other financial crimes.”
The bill would weaken the Consumer Financial Protection Bureau’s authority to regulate banks and payday lenders. The CFPB was established as a watchdog group in the wake of the financial crisis.
The bill would also ease regulations on local banks by eliminating the need for “stress tests” that require financial institutions to have plans for how to respond to another economic crisis. Banks that want to avoid Dodd-Frank-type regulations would be able to increase the amount of emergency funds on hand.
All five of Kentucky’s Republican representatives voted in favor of the legislation, the only Democrat in the delegation, Rep. John Yarmuth, voted against it.
Congressman James Comer, a Republican representing western and southern Kentucky, said he was proud to vote for the bill.
“This legislation would put an end to the disastrous, overreaching Dodd-Frank law that did nothing to end ‘too big to fail’ and devastated our community bankers in the process,” Comer said.
The Financial Choice Act would also repeal the Volcker Rule, which forbids banks from making certain types of bets on investments.
Yarmuth said the bill would put people’s investments at risk like during the 2008 financial crisis.
“It’s just an unwise public policy that only helps the banks, does not help anyone else. There is literally no one who is helped by repeal of the Volcker Rule except big banks,” Yarmuth said.
The bill passed out of the House on a 233-186 party-line vote. It’ll need 60 votes to pass the Senate, where Republicans have 52 members.
Yarmuth predicted that Senate Republicans would strip many parts of the House bill to get Democratic votes.
“If they could’ve taken some of these steps to protect community banks and restrict them to community banks, that would’ve been a probably good public policy,” he said.