WASHINGTON — House Republicans worked to undo former President Barack Obama's law overhauling the nation's financial rules, arguing that it is undermining economic growth. Democrats countered that the GOP effort risked a repeat of the 2008 meltdown that pushed the economy to the brink of collapse.
The Financial Services Committee's effort got off to a slow start Tuesday as Democrats insisted that the entire, nearly 600-page replacement bill be read aloud before the committee even considered amendments. The marathon session was expected to last through the night.
The 2010 Dodd-Frank law put the stiffest restrictions on banks and Wall Street since the 1930s Depression. It clamped down on banking practices and expanded consumer protections to restrain reckless conduct by financial firms and prevent a repeat of the 2008 meltdown.
"Regrettably, thanks to Dodd-Frank, too many garages in our nation are full of old cars instead of new startup small business," said Republican Rep. Jeb Hensarling. "It's time for the bailouts to end. It's time to help small businesses on Main Street."
But Democrats accused the GOP of amnesia about what led to the meltdown. They said Hensarling's bill would gut consumer protection and allow banks to make the kind of risky investments that required taxpayers to come to the rescue of the nation's largest financial institutions nearly a decade ago.
"It's an invitation for another Great Recession or worse," said Rep. Maxine Waters, D-Calif.
Hensarling's bill targets the heart of the law's restrictions on banks by offering a trade-off: Banks could qualify for most of the regulatory relief in the bill so long as they meet a strict basic requirement for building capital to cover unexpected big losses. He says the capital requirements will work as an insurance policy against a financial institution going out of business.
Hensarling's bill also targets the consumer protection agency that Congress established after the financial crisis, the Consumer Financial Protection Bureau, reducing its powers and making it easier for the president to remove its director.
Republicans are likely to pass the measure in the House. But the bill faces significant obstacles in the Senate where leaders have emphasized their desire to find areas of agreement to enhance economic growth. Democratic lawmakers predicted that at the end of the process, the bill would not become law despite an ally in the White House.
Democratic lawmakers referred to Hensarling's legislation as a Wall Street deregulation wish-list. Rep. Michael Capuano, D-Mass., said Republicans could have written a much narrower bill to help small banks and credit unions if that were their primary aim. Instead, he said they put together a bill for "Wall Street fat cats."
"We put Dodd-Frank in place to bring some discipline to the financial markets," said Rep. Ed Perlmutter, D-Colo. "There are times you have to have discipline to protect people."
In defending Dodd-Frank, Democrats also pointed to the rising stock market and dropping unemployment rates to contradict the GOP message that Dodd-Frank was stifling the economy.
In calling the GOP bill "immoral" Republican Rep. Bill Huizenga of Michigan accused Democrats of engaging in hyperbole.
"What is the real middle finger to the America people is the lack of a recovery that we've had because of Dodd-Frank," Huizenga said.
Republicans said their local community banks and credit unions were telling them to vote for the bill. They said that compliance offices to deal with government regulations are the fastest-growing component of those banks.
"The community banks in the rural parts of America did not cause any of the problems, and yet that's where the heaviest burden of the regulatory regime lies," said Rep. Steve Pearce, R-N.M. "So when we talk about making changes to Dodd-Frank, some of the greatest beneficial effects are going to be felt in my district."