When Congress passed the Dodd-Frank Act in 2010, the Democratic Party controlled both the Senate and House of Representatives. The Act was signed into law by President Obama, also a Democrat. Since then, the U.S. Congress has turned to the right, with the Republicans taking the House in 2010 and now the Senate in 2014. Is this a signal that the Act could be rolled back or repealed outright?
“You can’t expect a repeal, such as they are discussing in health care, but you will see some tinkering around the edges,” said Micah Green, partner at Squire Patton Boggs, who spoke with John Lothian News’ Doug Ashburn at FIA Expo Chicago the morning after the election. “There will be changes that could impact the future of how Dodd-Frank is implemented.”
With a change in the Senate comes a change in leadership of the Senate Banking Committee, with Richard Shelby (R-AL) expected to become chairman and Sherrod Brown (D-OH) as probable ranking Democrat. Green says that, while a conservative Republican, Shelby is “very much a populist,” with an interest in curbing too-big-to-fail financial institutions. Both Shelby and Brown favor smaller banks. While the House continues to work on lingering derivatives issues such as cross-border cooperation, end-user issues and margin requirements, there is a chance, according to Green, that the Senate will pass legislation.
“The question is how far they will go and how bipartisan it will be.”
He points to other parts of Dodd-Frank, such as the Consumer Financial Protection Bureau as vulnerable, not to outright repeal, but to added restraints, such as being subject to an annual appropriation.
Green also looks at the judicial reviews that have resulted from parts of the initial legislation. He points to the position limits rule, which was struck down in 2012, as an example of a rule that could have been more clearly written. Finally, he cites the possible systemic risks in clearing houses as an area that could see a review.
“There will be an opportunity to discuss issues that heretofore were being restricted to being discussed at the regulatory level. Now they are going to be discussed at both the regulatory and legislative level.”