Last week, Treasury Secretary Steve Mnuchin appeared before the Senate Banking, Housing and Urban Affairs Committee to discuss the Financial Stability Oversight Council’s annual report to Congress, of which Secretary Mnuchin is the chairperson. In his opening statement to the committee, Secretary Mnuchin offered praise for Committee Chairman Mike Crapo’s bipartisan legislation, the Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155), calling it a “thoughtful approach that better aligns our financial system to support economic growth in our communities.”
For starters, Secretary Mnuchin is right, this bill will ease the regulatory burden for small and midsize financial institutions that provide mortgage lending services to lower income Americans and those in rural communities. The bill also makes it easier for smaller financial institutions to engage in market making activities if the institutions are below $10 billion in assets in conjunction with additional leverage ratios. Perhaps the most discussed portion of the legislation is Title IV, which will increase the threshold in which bank holding companies are subject to enhanced regulation from the current $50 billion in assets to $250 billion in assets. The bill also provides a path for banks between $100 billion to $250 billion in assets to be exempt from regulatory red tape after 18 months of the enactment of the bill or sooner.
While this is an important step toward reforming Dodd-Frank and increasing consumer’s access to capital, the legislation has two areas that could be improved. First, larger financial institutions that provide services to millions of Americans do not have the ability to obtain regulatory relief in this legislation. Like the small and mid-size institutions, the larger financial institutions spend a significant amount of money on regulatory compliance when much of that spending could be better used in the hands of consumers and in the marketplace.
The bill also mandates credit reporting agencies to offer customers credit monitoring services “free of charge”, while industry competitors are not subject to this mandate. Simply put, these are private industries whose services are not the governments to give away. A government mandate like this will stifle both innovation and competition in the credit monitoring marketplace.
Chairman Crapo’s legislation demonstrates his thoughtful approach to reforming financial regulation while promoting economic growth; a goal that started early in 2017 with his committee soliciting reform proposals from industry and outside organizations. As Secretary Mnuchin noted S. 2155 also incorporates many of the Treasury’s recommendations and will provide much needed relief to consumers and small businesses. Americans for Tax Reform has supported President Trump’s call to reform Dodd-Frank and we welcome this reform package.