Markup ends quickly after Democrats decline to offer amendments;
Hensarling says bill would end 'Soviet-style command & control,'
Waters calls bill 'so bad that it simply cannot be fixed'

The House Financial Services Committee on Tuesday, Sept. 13, approved Chairman Jeb Hensarling's (R-TX) Financial CHOICE Act (HR 5983), a 512-page bill that would repeal substantial portions of the 2010 Dodd-Frank financial reform law, while creating what Hensarling called an "off-ramp" for banks exempting them from a number of prudential requirements if they agree to maintain a 10% leverage ratio, which would require them to hold more capital in reserve. The committee vote was 30-26, with all Republican members supporting Hensarling's bill except for Bruce Poliquin (R-ME). Four members did not vote: Republicans Stephen Fincher (TN), Frank Guinta (NH) and Patrick McHenry (NC) and Democrat Terri Sewell (AL).

Attached with this alert please find PDF files of the substitute amendment adopted (by voice vote) at the markup, as well as a committee memo from the majority summarizing HR 5983's various elements. Other information from the markup is posted here.

The markup, which was expected to consume two or three days of work on a bill with 11 separate titles, ended abruptly less than two hours after it started when Democrats announced they would not try to amend the bill. Republican members then also declined to offer amendments, beyond Hensarling's own substitute. Ranking Member Maxine Waters (D-CA) said the bill was "so bad that it simply cannot be fixed, and so we're not going to waste any more time on this." At the end of some remarks criticizing the bill, Joyce Beatty (D-OH) moved the previous question, a parliamentary maneuver intended to end debate and proceed directly to a vote. After some confusion on the dais, Hensarling gaveled the committee into a short recess. When the markup resumed, Hensarling quickly moved to a vote on the underlying bill as amended by the substitute.

The bill, which is considered unlikely to be taken up in the Senate, includes provisions that fall under the jurisdiction of other House committees — such as a number of changes to how the CFTC operates, which would have to be marked up by the Agriculture Committee. Presumably, after those panels advance the bill, HR 5983 could come to the House floor for a vote.

With little work on amendments, the markup largely consisted of a series of member speeches alternately supporting or castigating the measure. In his opening statement, Chairman Hensarling said that while Dodd-Frank's supporters had said its reforms would lift the economy, the nation had instead been "stuck in the slowest, weakest, most tepid recovery in the history of the Republic." He continued, "The big banks are bigger. We have seen historic levels of bond market illiquidity and volatility … We were told that [Dodd-Frank] would end 'too big to fail,' yet instead we know that it codified 'too big to fail' and created the Orderly Liquidation Authority so that taxpayers would be forced to bail it out." Hensarling said his bill would "hold Washington accountable by removing a Soviet-style command-and-control economy" and "ensure that the shadow regulators come out from the shadows and that government will be subject to the will of We, the People." He said the bill would "unleash a wave of capital formation of which our economy is in desperate need."

To Democratic critics who said his bill was a boon to Wall Street, Hensarling said, "I would have them answer the question: Why is it that after Dodd-Frank, the big banks are bigger? … Why has the Wall Street Journal reported recently that 95% of the campaign contributions of the big banks have all gone to Hillary Clinton?"

Ranking Member Waters said that she was "more than disappointed — I'm amazed that we're considering a highly partisan, damaging piece of legislation to kill Dodd-Frank and harm consumers." She said the committee had more pressing work to do, in areas like the National Flood Insurance Program (NFIP) and the "broken" credit reporting system. Like other Democrats at the markup, Waters highlighted an investigation by the Consumer Financial Protection Bureau (CFPB) that last week revealed Wells Fargo employees had opened "2 million fraudulent accounts" for the bank's retail customers, "and yet the chairman has uttered nothing about this scandal … We have nothing planned on this, but we sit with a bill that makes it easier for executives to escape accountability to shareholders." Waters recited a series of misfortunes suffered by millions of Americans since the financial crisis, such as waves of foreclosures and a "lifetime" of lower earnings and income inequality, "and yet here we are, pretending the crisis never happened and considering toxic legislation that takes us exactly in the wrong direction."

Other members gave remarks in support of the bill, including Sean Duffy (R-WI), Randy Neugebauer (R-TX), Scott Garrett (R-NJ) and Roger Williams (R-TX), while Democrats such as Carolyn Maloney (D-NY) and Bill Foster (D-IL) described the bill as "ideologically driven deregulation" and were critical of specific provisions targeting the CFPB and the Financial Stability Oversight Council (FSOC).

Features of HR 5983. Among many other provisions, the Financial CHOICE Act would:

Exempt banks from much of Dodd-Frank's prudential regime — including capital and liquidity requirements, limits on mergers, "living will" submissions and the "G-SIB" surcharge — if the bank agrees to maintain a 10% leverage ratio and has a "CAMELS" rating of 1 or 2. Hensarling has previously said the ratio would require the largest banks to raise (collectively) "several hundred billion dollars in new equity."

Repeal the FSOC's authority to designate non-banks as SIFIs and its authority to break up banks if they are deemed too risky, and make several changes designed to make the FSOC more transparent.

Require all financial regulators to perform a detailed cost-benefit analysis of all new regulations, and require all "major" financial regulations (i.e. with an economic effect of more than $100 million) to be approved by Congress.

Repeal the Volcker Rule banning proprietary trading by banks; repeal the "Durbin amendment" capping interchange fees for debit cards; and repeal the Department of Labor's new fiduciary rule for advisers to retirement plans.

Repeal the FDIC's Orderly Liquidation Authority to wind down large, failing banks, replacing it with a new bankruptcy chapter for large financial institutions.

Convert the CFPB into a five-member commission and repeal its ability to deem some financial products "abusive," among many other restrictions.

Make several reforms to the Federal Reserve System contained in HR 3189, the "FORM Act" passed by the House in November 2015, including requiring the Fed's Federal Open Markets Committee to "describe how FOMC policy rate decisions compare to a well-known standard" and requiring the Fed to undergo an annual audit by the Government Accountability Office;

Include the text of 22 bills passed by the committee or the House that are intended to boost capital formation, a package that committee Republicans have often described as "JOBS Act II."

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ATTACHMENTS

HR 5983 Amendment

HR 5983 Memo