House votes to gut banking reform law
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The U.S. House of Representatives has voted to gut key provisions of a banking reform law enacted during former President Barack Obama’s first term.

Members of the lower chamber voted 233 to 186 last week to pass a bill known as the Financial Choice Act. If implemented, the legislation would weaken the Dodd-Frank Act of 2010, which lawmakers passed following the 2008 financial crisis.

The bill was introduced a year ago by Rep. Jeb Hensarling (R-Texas), chairman of the Financial Services Committee.

Despite the House victory for Republican lawmakers, the bill in its current form isn’t expected to survive in the Senate.

“It is clear that Republicans in the House of Representatives want to dismantle the major legislative response to the financial crisis and Great Recession,” says Mark Hamrick, Bankrate’s senior economic analyst and Washington bureau chief. “What is not clear is that the Senate is prepared to go along with the House bill, in part because the GOP margin in the upper chamber is smaller.”

What Dodd-Frank opponents and proponents say

Dodd-Frank was designed to protect Main Street and prevent future financial crises. It led to the creation of the Consumer Financial Protection Bureau, an agency committed to supporting consumers and managing complaints about financial products and services.

But many people oppose Dodd-Frank.

Republicans say the law encourages big-bank bailouts. Many, including House Speaker Paul Ryan, argue that eliminating it would create job opportunities and boost the economy.

Critics also claim that Dodd-Frank hurts community banks and credit unions. By forcing them to meet unnecessary guidelines, opponents of the law say it stifles small businesses and limits access to capital.

Supporters say dumping Dodd-Frank would put consumers at risk and lead to more Wall Street bailouts. Furthermore, it could result in another major economic meltdown.

Rolling back banking regulations

The Financial Choice Act aims to overhaul the country’s financial system. It could bring regulatory relief to small banks and require input from the Trump Administration and Congress before implementing costly new rules.

The legislation would eliminate the fiduciary standard — which forces retirement advisers to put their clients’ best interests first. That’s why it’s key to find an adviser who will work for you.

The bill also would kill orderly liquidation authority, which created bankruptcy procedures for banks considered too big too fail.

It would also limit the capabilities of federal agencies such as the CFPB. Congress could make cuts to its budget and President Trump could fire its director for any reason.

What it means for consumers

The House vote is only the first step toward dismantling Dodd-Frank. Heads of the Comptroller of the Currency, the Federal Reserve and the Federal Deposit Insurance Corp. would have a say in the matter as well. But some of those positions haven’t been filled.

Consumers have little to worry about at this point. But a complete Dodd-Frank repeal could have long-lasting effects. It could limit access to consumer protections and unbiased retirement advice.

“Consumers should be concerned about ongoing efforts, both in Congress and in the administration, to dismantle regulations in wholesale fashion,” Hamrick says. “There’s broad agreement that Dodd-Frank could use some fine-tuning. That doesn’t mean that the proverbial regulatory baby should be thrown out with the bathwater.”

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