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Treasury reportedly prepared to recommend softer financial regulatory reform

The U.S. Treasury Department will advise the White House to take a moderate approach to financial regulatory reform in an effort to increase the likelihood of Senate support, Politico reported June 9.

Citing "people familiar with the document," Politico said the 160-page report will recommend a Volcker rule exemption for banks with fewer than $10 billion in total assets, a revision of the $50 billion regulatory threshold and the removal of the Consumer Financial Protection Bureau's power to directly examine banks.

The report was commissioned by President Donald Trump through an executive order issued Feb. 5, in which he directed Treasury Secretary Steven Mnuchin to review the current financial regulatory framework. Much of the existing regulations were established by the post-crisis Dodd-Frank financial reform bill, which Republicans have broadly blamed for supposedly damaging lending conditions. The report is due this month.

The Treasury Department's reported recommendations would be less aggressive than the Financial CHOICE Act that was recently passed by the U.S. House of Representatives on June 8. The bill, which was led by House Financial Services Chairman Jeb Hensarling, R-Texas, proposes the complete repeal of the Volcker rule and the restructuring of the CFPB into a stripped-down "Consumer Financial Opportunity Agency" with only enforcement authority.

The Politico report stated that the Treasury could be pursuing modest reform in an effort to gain bipartisan support in the Senate, since Republicans need 60 votes to pass a bill but only control 52 seats. At the end of May, Senate Majority Leader Mitch McConnell, R-Ky., said in a Bloomberg interview that "there are enough Democrats to keep us from reforming Dodd-Frank."