House Republicans on Thursday passed a sweeping financial regulation bill, eliminating many of the financial protections enacted by Congress in the wake of the 2008 recession and foreclosure crisis.
Those stricter regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which (in part) made banks' capital requirements more strict to prevent taxpayers from funding bailouts, were arguably the single largest set of reforms to the financial services industry in the United States since the wake of the Great Depression.
Though reporters and lawmakers have speculated that the bill, the Financial Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs (CHOICE) Act, won't pass the Senate—it's been referred to as "dead on arrival" in the upper chamber—its success in the House of Representatives is a coup for Republicans, many of whom have staked their candidacies on rolling back the Obama-era financial regulations.
Here's what to know about the CHOICE Act.
1. It Would Effectively Gut Some of Dodd-Frank's Most Popular Programs, Like the Consumer Financial Protection Bureau
The CHOICE Act would fold the Consumer Financial Protection Bureau into a commission that operates under the executive branch, instead of as an independent agency, and would strip it of its authority to police "unfair, deceptive, or abusive acts and practices."
Senator Elizabeth Warren (D-Massachusetts) created the CFPB in 2010; since then, the agency has, among other efforts, helped potential borrowers receive mortgage counseling, reduced the likelihood that new homeowners will face foreclosures, forced credit card companies to give customers refunds after perpetrating advertising and financial scams, and directed student loan companies to comply with fair lending laws.
CHOICE would also eliminate the Volcker Rule, which prevents banks from trading financial assets with their own money (proprietary trading), and the Department of Labor's fiduciary rule, which requires that brokers and investment advisers give clients saving for retirement advice in their best interest.
2. It Would Dramatically Alter How Banks Are Regulated
The CHOICE Act would subject all federal financial regulators—with the exception of the Federal Reserve's monetary policy operations—to the congressional appropriations process.
Harvard Law School's Corporate Governance and Financial Regulation journal writes that by "subjecting these revenue raising activities to the annual appropriation processes, as is currently the case for the SEC and CFTC, would provide Congress with frequent opportunities to influence the budgets, size, scope, priorities, and activities of any agency subject to the process."
3. It's the "Crown Jewel" of the GOP's Financial Reform Efforts
Though Democrats have said the CHOICE Act will "unleash the demons that took the world economy" and "put Wall Street recklessness back in charge, leaving consumers in the cold," Republicans in the House have argued that Dodd-Frank's regulations have prevented small business owners from receiving loans, creating "a bureaucratic nightmare" for entrepreneurs.
Paul Ryan told reporters Thursday that the sweeping bill was the "crown jewel" of the party's efforts to roll back Dodd-Frank regulations. "The Dodd-Frank Act has had a lot of bad consequences for our economy, but most of all in the small communities across our country," he said, per a partial transcript recorded by CNN.