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Republicans Begin Hearings To Peel Back Dodd-Frank

DAVID GREENE, HOST:

I will forgive you for not wanting to read the Dodd-Frank financial regulations. They're, oh, 22,000 pages long and really, really dense but also vitally important according to Democrats who pushed this law through in 2010. They hoped to end abuses in what we learned was a precarious financial system.

But Republicans say Dodd-Frank was a mistake. They want to replace it. And hearings on the law begin today on Capitol Hill as Charles Lane from member station WSHU reports.

CHARLES LANE, BYLINE: Even Dodd-Frank's biggest supporters want to tweak it like former Fed governor Daniel Tarullo.

(SOUNDBITE OF ARCHIVED RECORDING)

DANIEL TARULLO: Usually a law like Dodd-Frank would have been followed some months later by another law containing various technical corrections or maybe some that go a little beyond technical corrections.

LANE: Tarullo says the law is much too harsh on small banks. He also suggests raising the threshold for what's considered a systematically important bank. And he suggests striking the so-called Volcker Rule which bars banks from trading like hedge funds.

(SOUNDBITE OF ARCHIVED RECORDING)

TARULLO: Just hasn't worked out well, particularly with five different agencies administering the rule.

LANE: But whereas regulators like to Tarullo want the core of Dodd-Frank to remain, the GOP-controlled Congress want to get rid of most of it. The so-called CHOICE Act has scores of changes.

Top among them, it gives banks a route out of rigorous stress testing and strips away most of the sweeping powers of the Consumer Financial Protection Bureau, an agency that's returned some $12 billion to consumers over the last six years. The business community looks at Dodd-Frank and sees a drag on the U.S. economy. Tom Quaadman is with the U.S. Chamber of Commerce.

TOM QUAADMAN: I think where we've been the last eight years - and for some very good reasons - concentrated solely on stability. But the fact of the matter is that you can't have stability without growth.

LANE: Quaadman says all those pages of regulations have made doing business harder and less profitable.

QUAADMAN: Voters have clearly said that a 2 percent growth economy is not tolerable any longer.

LANE: However, many worry that too much economic growth could lead to the kinds of quick profits that brought down the economy in 2008. Marcus Stanley is policy director of Americans for Financial Reform, a coalition of left-leaning groups.

MARCUS STANLEY: This bill almost gives Wall Street veto power over the regulatory protections and oversight that are put in place.

LANE: Stanley is most concerned with how the CHOICE Act fundamentally changes the relationship between watchdogs and industry. Under the Republican plan, rules aimed at protecting consumers can be blocked by businesses and then delayed while the case winds through federal court. At this point, it's not clear that the GOP has the votes to pass the CHOICE Act but Stanley says he will still be worried.

STANLEY: There is a lot of pieces of the CHOICE Act that represent a broader agenda by the Republican Party and by the Trump administration.

LANE: All this back and forth isn't surprising to historians.

JERRY MARKHAM: No, this is very predictable (laughter).

LANE: Jerry Markham teaches financial history at Florida International University. He says there's almost a script to financial regulation. First, there's a boom. Then there's a crisis and then overregulation and then the kinds of deregulation offered now by Republicans.

MARKHAM: Then when we have our next boom and the crash, then they'll blame it on that lightening of the regulations.

LANE: Markham says there was one point where this cycle could have been broken. It was in the spring of 2008, when the Treasury Department published a plan to modernize our system of oversight but then the crisis hit and the cycle continued. For NPR News, I'm Charles Lane.

(SOUNDBITE OF KENMOCHI HIDEFUMI'S "SURRENDER") Transcript provided by NPR, Copyright NPR.

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