WASHINGTON (AP) — Democratic lawmakers will attempt to protect the independence of a consumer watchdog unit as Republicans move forward with an overhaul of the nation's financial regulatory laws.
House Republicans are working to undo much of the 2010 Dodd-Frank law that put the stiffest restrictions on banks and Wall Street since the 1930s Depression. On display throughout the debate Tuesday were two mindsets.
Republicans argued that the law known as Dodd-Frank that passed under President Barack Obama was "strangling the economy." Democratic lawmakers countered that "there are times you have to have discipline to protect people."
Democrats are particularly focused on defending the Consumer Financial Protection Bureau. The Republican bill would reduce its powers, make it easier for the president to remove its director and subject it to the regular appropriations process.
"When we wrote Dodd-Frank, we wanted the bureau to be above the fray so that it could focus solely on its mission of protecting consumers," said Rep. Nydia Velazquez, D-N.Y., author of an amendment seeking to keep the bureau's funding with the Federal Reserve instead of Congress.
Republicans argued that they want to enhance the accountability of the bureau. They said Congress has too little say over how the bureau operates.
"It's about checks and balances," said Rep. Jeb Hensarling, the GOP chairman of the House Financial Services Committee. "This is part of what we do."
The panel will continue working through the proposed replacement bill for the Dodd-Frank law on Wednesday and possibly into Thursday.
The Financial Services Committee's effort got off to a slow start Tuesday as Democrats insisted that much of the 600-page replacement bill be read aloud before the committee even considered amendments. The marathon session had been expected to last through the night, but the committees leaders agreed instead to hold the first votes Wednesday morning in what will now be at least a two-day affair.
Hensarling said that Dodd-Frank was making life difficult for community banks, forcing them to focus their resources on regulatory compliance rather than providing capital to local businesses and consumers.
"No wonder entrepreneurship is at a generational low in America," Hensarling said. "Regrettably, thanks to Dodd-Frank, too many garages in our nation are full of old cars instead of new startup small businesses."
Democrats accused the GOP of exaggerating the plight of capital markets. They said Hensarling's bill would gut consumer protection and allow banks to make the kind of risky investments that required taxpayers to come to their rescue nearly a decade ago.
"It's an invitation for another Great Recession or worse," said Rep. Maxine Waters, D-Calif.
Hensarling's bill targets the heart of the law's restrictions on banks by offering a trade-off: Banks could qualify for most of the regulatory relief in the bill so long as they meet a strict basic requirement for building capital to cover unexpected big losses. He says the capital requirements will work as an insurance policy against a financial institution going out of business.
Republicans are likely to pass the measure in the House. But the bill faces significant obstacles in the Senate, where leaders have emphasized their desire to find areas of agreement to enhance economic growth. Democratic lawmakers predicted that at the end of the process, the bill would not become law despite an ally in the White House.
The language that lawmakers used to describe Dodd-Frank and the GOP's Financial Choice Act replacement was often raw and emotional.
Rep. Stephen Lynch, D-Mass., called Hensarling's bill the worst he's seen during his 16 years in Congress. "This is really a nefarious accomplishment," Lynch said.
Hensarling countered that, considering the source, he viewed Lynch's remarks as a compliment.
Republicans said their local community banks and credit unions were telling them to vote for the bill. They said that compliance offices to deal with government regulations are the fastest-growing component of those banks.
"The community banks in the rural parts of America did not cause any of the problems, and yet that's where the heaviest burden of the regulatory regime lies," said Rep. Steve Pearce, R-N.M. "So when we talk about making changes to Dodd-Frank, some of the greatest beneficial effects are going to be felt in my district."