Will the House’s “Must Haves” Make It Into Financial Reform?
By Norbert Michel, Contributor
March 26, 2018
The Independent Community Bankers of America is very close to securing a victory for its members. Just one thing is keeping the Senate-passed Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155) from sailing to the White House for President Trump’s signature: The House of Representatives.
Of course, this hold-up is not very odd. As millions of people learned via School House Rock, both chambers of Congress are supposed to have a say in what becomes U.S. law.
But politics can take strange twists, and now a handful of senators and lobbyists are blaming conservatives—especially House Financial Services Chairman Jeb Hensarling (R-Texas)—for endangering financial regulatory reform.
So just how unreasonable is Hensarling being? Is he trying to convince the Senate to take up reforms that would obviously fail to garner any Democratic support, such as repealing titles of Dodd-Frank? Far from it.
Hensarling recently “laid out a list of roughly 30 House provisions with bipartisan backing” that he wants to include in the reform package. He explained his position this way: “Those bills that get bipartisan support [in the House], we expect to be in the final package. I don’t know any other way to put it.”
His spokesperson added a bit of important context: “Chairman Hensarling offered to negotiate inclusion of House bills before the Senate bill was passed. That did not happen.”
All provisions on Hensarling’s list garnered bipartisan support. A third of them passed either unanimously or by voice vote; they are about as far from controversial as possible. (Two were included in the recently passed omnibus spending bill). Here’s a sample from the House list:
- H.R. 477 – The Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2017. H.R. 477 would exempt certain small merger-and-acquisition brokers that facilitate sales of privately held companies from the broker-dealer registration requirements of the Securities Exchange Act of 1934. Those registration requirements are incredibly expensive, and a firm that helps to sell a dry cleaning shop or pizza parlor should not be regulated the same as Merrill Lynch. The bill passed the House on a vote of 426 to 0.
- H.R. 1843 - Restraining Excessive Seizure of Property through the Exploitation of Civil Asset Forfeiture Tools Act. H.R. 1843 would amend the authority and procedures that the IRS can use to seize property related to violations of Bank Secrecy Act (BSA) reporting requirements. Specifically, the bill states that the “IRS may only seize property it suspects has been structured to avoid BSA reporting requirements if the property was derived from an illegal source or the funds were structured for the purpose of concealing the violation of a criminal law.” Among other new consumer protections, the bill requires the IRS to give notice and a post-seizure hearing. H.R 1843 passed the House by voice vote.
- H.R. 3903 - Encouraging Public Offerings Act of 2017. This bill would amend the Securities Act of 1933 to expand the ability of companies considering going public to use “testing the waters” and “confidential draft registration submissions,” popular capital formation tools currently available only to emerging growth companies. The bill passed the House by a vote of 419 to 0.
- H.R. 4292 - Financial Institution Living Will Improvement Act of 2017. This legislation would amend Section 165(d) of the Dodd-Frank Wall Street Reform and Consumer Protection Act to reform the living will process. The improvements include moving to a bi-annual reporting period and requiring regulators to make their living will assessment framework public. The bill passed the House 414 to 0.
- H.R. 5078 - TRID Improvement Act of 2018. To improve the TILA-RESPA Integrated Disclosure rule, this bill would amend the Real Estate Settlement Procedures of 1974, thus modifying the disclosure requirements applicable to mortgage loans. The improvements include requiring that the disclosed charges for any title insurance premium be equal to the amount actually charged. H.R. 5078 passed the House by voice vote.
There are many more bills with similarly strong bipartisan support in the House, so it only makes sense that the two chambers try to get as many of these improvements into law as possible. There are very different dynamics in the Senate, but that fact should not prevent a compromise on reforms with such overwhelming support in the House.
The Senate bill passed the upper chamber with 67 votes. It would provide targeted exemptions from a few regulations for smaller banks. The bill is not nearly as comprehensive as the House bill passed in June, but nobody, least of all Chairman Hensarling, ever expected the Senate to make wholesale changes to the 2010 Dodd-Frank Act in this new bill.
At the very least, Senate Democrats should go on record explaining why they oppose financial reforms that their House colleagues clearly want enacted.