Financial Deregulation Gains Ground in the House

September 25th, 2014

Last week the House of Representatives overwhelmingly approved H.R. 5461, the Federal Reserve Transparency Act, a bill to amend the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).  The bill was introduced by Representative Andy Barr (R-KY), and received strong Republican support with the bill passing with 327 votes to 97 votes.  The majority of Democrats also voted in favor of the bill. The proposed legislation reflects a mounting desire, especially among Republicans, to unwind the financial reforms implemented in the wake of the financial crisis.

The bill proposes to amend the Volcker Rule to exclude certain debt securities from collateralized loan obligations (CLOs) from the rule’s restrictions on acquiring ownership interest in a hedge fund or private equity fund.  Revisions to relax the definition of points and fees under the Ability to Repay/Qualified Mortgage (QM) are also set forth in the bill. The legislation would also empower Congress to extensively audit the Federal Reserve.

The provisions of H.R. 5461 are largely similar to a Senate Bill, S. 2270, the Insurance Capital Standards Clarification Act of 2014. While both bills likely encompass too many complex, partisan issues to pass, it appears that there is generally shared support for financial deregulation legislation in the House of Representatives and Senate on both sides of the aisle.

 

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