Senate Republicans, Democrats agree on community bank relief, but point fingers on tactics

24 May 2017 10:10am

16 May 2017. By Neil Haggerty.

Senior senators from both parties agreed that community banking requirements of the Dodd-Frank Act should be eased, but the two sides dissolved into finger pointing over how it should be done as the Senate begins to consider changes in the law.

"My community bankers have taken a hit," Senate Majority Leader Mitch McConnell said in a Bloomberg Television interview. "So far, the Democrats on the Senate Banking Committee, and there are enough Democrats to keep us from reforming Dodd-Frank, don't seem to want to change it even though all of their community bankers are complaining about it."

The Kentucky Republican suggested Tuesday that community bank relief should be part of a broader review of Dodd-Frank.

In response to McConnell's comments, Sherrod Brown, the top Democrat on the Senate Banking Committee, said, "If this were really about community banks, we might have come to an agreement years ago, but Republicans are once again using them as leverage to help a rogue's gallery of special interests."

Democrats will do everything possible to block broader Dodd-Frank revisions "aimed at leaving Americans at the mercy of predatory lenders and on the hook for another megabank bailout," Brown said. Any statutory changes would need the support of at least eight Senate Democrats.

The Ohio Democrat suggested several ways to streamline rules for smaller banks. Among these would be extending the time frame in which these banks must be examined; eliminating requirements to send customers privacy notices if policies haven't changed; and allowing privately insured credit unions to be eligible for membership and funding from the Federal Home Loan Bank.

House Bill

The McConnell-Brown conflict mirrors a similar dispute in the House last month between Republicans and Democrats.

The House Financial Services Committee advanced the Financial Choice Act, a nearly 600-page bill that rolls back many of the Dodd-Frank Wall Street reforms.

During deliberations, Republicans and Democrats agreed that changes to Dodd-Frank could be made to relieve small and community banks from regulatory burdens. But Democrats urged Republicans to detach provisions relating community banks and vote on them separately.

Representative Michael Capuano, a Massachusetts Democrat, said Republicans are holding the popular community bank section "hostage" to win passage of a bill that "helps the big Wall Street fat cats."

The bill, which passed the House panel in a 34-26 party line vote, also includes provisions that would curb the Consumer Financial Protection Bureau's authority, repeal regulators' authority to wind down failing financial institutions and repeal the Volcker rule, among other things.

Fintech Regulation in 2018