news

FAQ: How would the Financial CHOICE Act change current compliance regs?- Valutrics

The Financial CHOICE Act of 2017 is a 600-page bill aimed at dismantling many of the safeguards established following the 2008 financial meltdown. The legislation was introduced The Financial CHOICE Act would repeal numerous financial rules, which its supporters claim harm economic growth The Trump Administration supports the legislation, calling it a “necessary and important” step for U.S. financial reform. In a June 6 statement, the White House said that the bill reflects the administration’s core principles for regulating the financial system, including preventing taxpayer-funded bailouts and making regulatory measures more efficient.

This FAQ is part of SearchCompliance’s IT Compliance FAQ series.

Who opposes the Financial CHOICE Act?     

Democrats in Congress vehemently oppose the Financial CHOICE Act. Opponents have dubbed it the “Wrong CHOICE Act,” and argue that it would eliminate some of the most important rules preventing a repeat of the 2008 financial crisis. House Minority Leader Nancy Pelosi (D-Calif.) called the legislation “a dangerous, Wall Street-first bill that would drag us right back to the days of the Great Recession.”

Numerous unions and consumer advocacy groups have also spoken out against the legislation. The AFL-CIO warned that deregulation led to the 2008 financial crisis, and the deregulatory initiatives outlined in the Financial CHOICE Act would harm working people. The Consumer Federation of America cautioned that if the safeguards established Related Content
Nancy Pelosi’s statement regarding the Financial CHOICE Act
AFL-CIO: CHOICE Act puts economy at risk

How does the Financial CHOICE Act address the idea that some banks are “too big to fail?”

Backers of the Financial CHOICE Act argue that banks must not be allowed to remain “too big to fail.” The bill would retroactively repeal the authority of the Financial Stability Oversight Council (FSOC) to designate some companies as “systematically important financial institutions,” aka, “too big to fail.” Companies given this designation are subject to extra regulatory oversight and restrictions.

The bill’s authors accuse the FSOC of having a “highly politicized structure and penchant for secrecy,” and claim that the council “injects unprecedented levels of political risk into the financial system The bill would also eliminate the Federal Deposit Insurance Corp.’s Orderly Liquidation Authority, which allows regulators to intervene if a large financial institution is about to collapse in order to prevent the failure from spreading to the rest of the financial system. The bill would establish a new bankruptcy chapter in place of the current FSOC and FDIC rules designed to protect the U.S. financial system from the failure of a single institution.

Related Content
An overview of the Financial CHOICE Act of 2017
House Committee on Financial Services: Proposal would reform U.S. regulatory system

What will happen to the Consumer Financial Protection Bureau if the Financial CHOICE Act becomes law?

The Financial CHOICE Act would move the Consumer Financial Protection Bureau into the executive branch and empower the president to fire the bureau head at will. The bill would rename the bureau the “Consumer Law Enforcement Agency” and limit its ability to act against institutions for unfair, deceptive or abusive practices. It would also give Congress additional oversight of the bureau, including authority over its budget, which effectively enables it to hobble an agency The president would also be able to fire the head of the Federal Housing Finance Agency, which oversees the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.

Related Content
GOP bill would cripple Consumer Financial Protection Bureau
Volcker Rule repeal included in draft of House spending bill

How would current rules change under the Financial CHOICE Act?

The Financial CHOICE Act would repeal the Volcker Rule, which restricts banks from making certain speculative investments in an effort to prevent them from taking big risks at taxpayer expense. The bill’s authors called the Volcker Rule (named after former Federal Reserve Chairman Paul Volcker) “a solution in search of a problem,” and claims that it increases borrowing costs for businesses and reduces economic activity. The Financial CHOICE Act would also repeal the Department of Labor’s “Fiduciary Rule” requiring brokers to act in the best interest of their clients when providing retirement advice.

Supporters of the Financial CHOICE Act maintain that it would promote greater accountability from Wall Street Related Content
House bill would dismantle financial reforms
House passes Financial CHOICE Act in effort to fix Dodd-Frank

What are the chances of the Financial CHOICE Act becoming law?

The strictly partisan Financial CHOICE Act has slim odds of becoming law as written. In the Senate, the measure would require support from at least eight Democrats to garner the necessary 60 votes. (At present, Republicans hold 52 seats in the Senate.) A more likely scenario is that the Senate will craft a separate, less expansive financial reform initiative. Many of the CHOICE Act proposals could inform future debate on U.S. financial reform, however, and some could eventually become law.

Related Content
White House statement supporting the Financial CHOICE Act
Now that the House has voted to reform Dodd-Frank, what comes next?