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Senate passes major Dodd-Frank revision bill

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Senate passes major Dodd-Frank revision bill

The U.S. Senate passed legislation paring back portions of the Dodd-Frank postcrisis financial regulatory framework in a 67-31 vote March 14.

The bill provides large regional banks relief by raising the asset threshold for the enhanced regulation of systemically important financial institutions, or SIFIs, from $50 billion to $250 billion and eases the accounting of the supplementary leverage ratio for custody banks.

For smaller banks, the bill provides an exemption from the Volcker rule for firms with less than $10 billion, and it would lift Home Mortgage Disclosure Act reporting requirements on firms that originate fewer than 500 mortgages or loans. The legislation also includes consumer protection provisions such as free credit freezes and ongoing credit monitoring for active-duty service members.

Sixteen Democrats and one Independent ultimately joined 50 Republicans to easily clear the 60-vote threshold needed. Along with the 12 Democrats and one Independent that cosigned the bill, Sens. Maggie Hassan and Jeanne Shaheen of New Hampshire, Bill Nelson of Florida, and Debbie Stabenow of Michigan were the four other Democrats that voted in favor.

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During six days of work on the floor of the Senate, the bill's creators, led by Senate Banking Committee Chair and Idaho Republican Mike Crapo, negotiated a substitute amendment that incorporated a handful of provisions from the House Financial Services Committee to improve its attractiveness to the other chamber.

The U.S. House of Representatives is now tasked with legislating its own version of the bill. House Financial Services Committee Chair Jeb Hensarling, R-Texas, has made it clear he is not completely satisfied with the Senate package. Last week, Hensarling's office sent out a list of 29 provisions "curiously left out."

The House's game plan is to create a conference committee between both legislative chambers to reconcile differences between the Senate package and the House's more aggressive provisions that run counter to central tenets of the Senate bill.

For example, a House proposal would regulate SIFIs using a five-point risk-based assessment, compared to the Senate bill's $250 billion asset threshold.

The House could avoid conference by either simply approving the Senate bill or making amendments to the Senate package and sending it back to the Senate for review.

But Senate Democrats warned that the House should tread lightly in splicing its provisions into the bill. Sen. Heidi Heitkamp, D-N.D., said in an interview that taking the bill to conference with the House's previously proposed regulatory package, the Financial CHOICE Act, would be "unfortunate," adding that the CHOICE Act simply could not pass the Senate.

"I think that the question is whether you're going to let perfect be the enemy of good," Heitkamp said.

The Senate bill, for the time being, has the support of the White House, which issued a statement March 14 applauding the Senate for providing "much-needed relief" from the Dodd-Frank Act.

None of 161 amendments were allowed for consideration on the Senate floor by Majority Leader Mitch McConnell, R-Ky., including a provision from Tennessee Republican Bob Corker seeking to tighten the supplementary leverage ratio provision to strictly cover the three main custody banks: State Street Corp., Northern Trust Corp. and Bank of New York Mellon Corp.

The bill would make it easier for custody banks to pass capital requirements, as funds kept at central banks would no longer count toward the denominator in the ratio, called the SLR. The Congressional Budget Office on March 6 said there is a 50% chance the Federal Reserve expands the SLR relief to the global systemically important banks JPMorgan Chase & Co. and Citigroup Inc., and Corker hoped to prevent that by eliminating the SLR relief entirely.

"Maybe during conference, there's a way, if there is a conference, to tighten it up a little bit," Corker said in an interview.