A top House Republican on Tuesday unveiled a sweeping plan to replace the Dodd-Frank financial reform law, which has been fiercely criticized as overly burdensome by GOP lawmakers and Wall Street executives.
Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee, called the 2010 law "a grave mistake foisted upon the American people" as he laid out the alternative that Republicans could seek if they win the White House in November.
Key provisions would reduce the power of the new Consumer Financial Protection Bureau and allow banks to avoid stricter oversight by increasing the amount of capital they hold.
"Simply put, Dodd-Frank has failed," Hensarling said in a speech to the Economic Club of New York. "It's time for a new legislative paradigm in banking and capital markets."
Defenders of Dodd-Frank say it has made the financial system safer by increasing regulatory oversight and mandating rules to prevent a future crisis.
The complex new legislation has virtually no chance of passing Congress this year. And President Obama would almost certainly veto any bill rolling back Dodd-Frank, which is one of his signature accomplishments.
But Hensarling's plan is a road map of what Republicans could try to accomplish on financial regulation if the party wins the presidency and retains control of Congress in the November elections.
Donald Trump, the presumptive Republican presidential nominee, said last month that he was drawing up plans that would "be close to dismantling Dodd-Frank."
Even supporters of Dodd-Frank say that regulators have been slow to adopt new rules and that some provisions could be strengthened. Still, they said the Republican plan goes in the wrong direction.
Dennis Kelleher, president of Better Markets, a group that advocates stricter financial regulation, called the proposal "little more than a laundry list of every wish Wall Street and its lobbyists ever asked for."
Hillary Clinton, the presumptive Democratic presidential nominee, "strongly opposes" Hensarling's plan, said campaign advisor Gary Gensler, a former head of the Commodity Futures Trading Commission.
Gensler said Republicans want "to roll back measures that protect consumers and curb excessive risk-taking on Wall Street."
Dodd-Frank passed Congress with almost no Republican support in the wake of the 2008 financial crisis.
The law toughened regulations on banks and other financial firms, set up a powerful panel of regulators to watch for signs of instability and created a new consumer bureau, which has broad authority to oversee credit cards, mortgages and other financial products.
Republicans have been trying unsuccessfully to scale back the law since taking control of the House in 2011.
Hensarling said Tuesday that the financial crisis wasn't caused by lack of regulation but by "dumb regulation."
Under his plan, banks could avoid tougher regulatory oversight if they held capital that was at least 10% of their assets.The current requirement is 3% for most banks and 6% for institutions considered systemically important.
Since the financial crisis, regulators have forced banks to hold more capital to cover potential losses. But Hensarling stressed that his proposal is voluntary. Banks could offset the higher requirements with the ability to avoid "Dodd-Frank's suffocating regulatory complexity and control."
To end the problem of financial institutions considered too big to fail, Hensarling would create a new section of the bankruptcy code to wind them down. That would replace Dodd-Frank's orderly liquidation authority, which allows regulators to seize and shut down a major financial firm on the brink of failure. Republicans have criticized that power as a type of bailout.
Hensarling also targeted the new consumer bureau. The CFPB's single director would be replaced with a bipartisan, five-member commission and the agency's funding would be subject to congressional appropriations.
Hensarling also would take away the authority of the Financial Stability Oversight Council, a panel of regulators created by Dodd-Frank, to designate any firms as systemically important. And his plan would repeal the Volcker Rule, which prohibits banks from trading for their own profit and limits their ownership of risky investments.
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3:44 p.m.: This article has been updated with more reporting throughout.