Short form summary (TLDR version): Bill Clinton betrayed Americans by repealing FDR’s brilliant Glass Steagall act that worked fine for 7 decades. After deregulating Wall Street (it’s what the Clintons do), we of course had a recession under the Bush administration. During the recession the Obama administration instituted the Dodd Frank Act, which was weak and contained loop holes, but was obviously better then nothing. Now the GOP would like to remove most of Dodd-Frank to make the jobs of fraudulent bankers even easier.
On Thursday, June 8th, the Republican-controlled House of Representatives passed a bill known as the Financial Choice Act. The bill, which undoes many aspects of the Dodd-Frank Act of 2010, passed 233 to 186 in the House with a mostly partisan vote. Representative Walter Jones of North Carolina was the only Republican who voted against the Financial Choice Act, sharing the Democrats’ belief that Dodd-Frank is required in order to prevent another economic crisis. His vote against the Choice Act was not surprising, however, because he was one of three Republicans to vote for the Dodd-Frank Act back in 2010.
The Republicans believe that the Dodd-Frank regulations prevented the economy from making a full recovery after the financial crisis. The House Financial Services Committee Chairman Jeb Hensarling, a Texas Republican, believes that Dodd-Frank created more regulations than all other Obama-era bills combined. He says that the Choice Act will, “Replace bailout with bankruptcy,” and, “Replace Washington micromanagement with market discipline.”
While the Financial Choice Act has already passed in the House of Representatives, there is less optimism that the bill will make it through the Senate. Senate Majority Leader Mitch McConnell, a Kentucky Republican, does not have high hopes that the Dodd-Frank reversal will pass in the higher chamber of Congress. The bill would require 60 votes to pass in the Senate with only 52 Republicans, leaving the bill’s supporters with only two choices: bipartisan compromise or budget reconciliation.
Reconciliation is an alternative process in which a simple majority can decide whether a piece of legislation is too financially burdensome for the Federal Government. By utilizing this process, as is currently being done with the Obamacare repeal, the Republican-controlled Senate can pass the Financial Choice Act with only 51 votes.
Under the Choice Act, the Dodd-Frank provision known as the Consumer Financial Protection Bureau will lose all of its authority. With this repeal, Democratic Representative Maxine Waters of California believes that the current Republican administration wants to, “open the door to another economic catastrophe like the Great Recession and return us to a financial system where reckless and predatory practices harm our communities and families.” The Consumer Financial Protection Bureau has so far distributed over $12 million in relief to consumers and assisted in the penalization of the Wells Fargo bank which opened 2.1 million unauthorized accounts.
The Financial Choice Act will cause the Consumer Bureau to lose its power to regulate car title and payday loans along with its ability to carefully watch for compliance of financial firms. Additionally, the director of the bureau reports to the President and can be removed at any time. And since the bureau has no independent funding, its budget is decided by Congress. Under the current Republican administration, the Consumer Financial Protection Bureau would be completely neutered by the passing of the Financial Choice Act in the Senate.
Financial firms tend to support the Financial Choice Act, particularly in its removal of the retirement account rule requiring brokers to put the interest of consumers over their own.