While some alterations to the act have bipartisan support in Congress, many Democrats say they remain wary of measures that might undermine the law that created the Consumer Financial Protection Bureau and mandated regulations to curb risky behavior by financial institutions deemed too big to fail.
“There is general agreement that technical corrections on an 800-page bill would be appropriate,” said Lauren Kulik, a spokeswoman for Senator Sherrod Brown, a Democrat from Ohio and a member of the Senate Banking Committee. At the same time, she said, Dodd-Frank supporters worry that a technical change could “morph into a substantive change.”
“Technical corrections are in the eye of the beholder,” said Senator Jack Reed, a Rhode Island Democrat who also sits on the committee.
Lawmakers and industry advocates are working on categorizing which of the many proposals for Dodd-Frank changes should be defined as a technical, said James Ballentine, executive vice president of congressional relations and political affairs at the American Bankers Association.
“Easy and technical are not two words that go together in this environment,” Ballentine said. “A technical fix for some is a major issue for others and that’s what requires discussion.”
As that discussion evolves, proponents of change to Dodd- Frank say they see support growing in both parties.
“The biggest difference between today and two years ago is that lawmakers seem to be focused less on punishing the banks and more on how to get credit flowing again,” said Jaret Seiberg, senior policy analyst at Washington Research Group, a unit of Guggenheim Securities. “And that’s a bipartisan perspective that could open the door to Dodd-Frank reform.”
Lisa Donner, executive director of Americans for Financial Reform, which advocates tighter banking regulation, said the industry has disguised broad changes to Dodd-Frank as minor tweaks to gain support. She said no consensus exists for technical changes.
“People telling the story about how there’s a bipartisan consensus are actually campaigning for significant rollbacks of the law,” she said.
Among proposals with bipartisan support are alterations to to the law’s derivatives provisions and a bill intended to limit distribution of confidential bank data obtained by the consumer bureau. Other changes, including a Republican proposal to replace the director of that bureau with a five-member commission, have lawmakers split along party lines.
The Republican-controlled House has already acted on some Dodd-Frank changes proposed by financial firms. The chamber approved a bill in March to exempt manufacturers and commercial swap-users from collateral requirements and ease regulations on inter-company trades. Other measures have won committee approval and are awaiting floor votes.
The Senate, controlled by Democrats, hasn’t approved any of those Dodd-Frank changes.
“Leadership in the House should be able to pass a ham sandwich if they want,” Seiberg said. “It’s the Senate where the minority party and majority party have to work together if you want to get something passed.”
Senate Banking Committee Chairman Tim Johnson, a South Dakota Democrat, has asked the banking industry to define the “technical changes” it would like to see, according to two people involved in the discussions.
“I am open to the idea of improving Wall Street reform by making technical corrections and fixing unintended consequences, but in today’s political environment there will need to be broad bipartisan support to get anything approved,” Johnson said during a hearing in March.
“There are some reports from the Senate that they are willing to take a look at some of the reforms,” said Representative Scott Garrett, a Republican from New Jersey who sits on the Financial Services Committee. “I welcome them to the table. They took the view for the last two years that nothing at all needed to be changed in Dodd-Frank despite the fact that members of their own party in the House voted on bills out of committee and onto the floor.”
Senator Mark Warner, a Democrat from Virginia and Dodd- Frank supporter, said he would like to see several alterations to the law, including an independent leader to replace the Treasury secretary as head of the Financial Stability Oversight Council, a panel created to spot systemic risk, as well changes to derivatives rules.