The Congressional Review Act (CRA)
CRA, passed in 1996, allows Congress to review any new federal regulations issued by government agencies within 60 legislative days. Legislation to repeal new regulation can be passed by a simple majority vote, avoiding the possibility of a filibuster and the GOP can run the gauntlet unobstructed. Note:
- the regulations subject to Congressional review date back to those finalized after last June 13, hundreds in all, five pertaining to DFA
- if Congress decides to pass legislation disapproving these new regulations, the Resolution must be signed by the president
- Caveat: independent agencies such as the Fed can propose alternative rules in response to GOP proposals, creating a back and forth that might lead to a more watered down reform than the GOP is hoping for
In the past, the CRA has not been used as a weapon and has only been used once to repeal regulatory measures. This week, Republicans have already begun to push forward legislation to wipe out Obama-era regulations via the CRA, ranging from rules to end pay discrimination to methane.
The DFA regulations congressional Republicans are targeting include:
- rules on derivatives adopted by the CFTC
- rules on prepaid debit cards and debit card transaction charges adopted by the CFPB
- regulations imposing capital requirements for banks to trade derivatives
The minority has practically no power to stop these regulations from being wiped out as only a simple majority in both Republican-controlled houses is needed to overturn a regulation under the CRA.
Congressional Republicans may choose to reform or repeal provisions of DFA through a reconciliation process, which limits allotted debate time to under twenty hours. This is passed through a budget resolution that instructs the relevant committees to draft legislation to tweak laws to meet the standards of the new budget resolution. According to the arcane rules governing the budget process,
- nothing related to a budget resolution is subject to filibuster, which allows Republicans to easily tweak DFA rules and regulations
- instructions are also constrained by the Byrd Rule, which blocks legislation that would significantly increase the deficit or tackle extraneous matters
The GOP will most likely use the budget reconciliation process to recommend that committees pass legislation to replace regulators’ DFA authority to seize and wind down troubled banks. It’s also likely that Republicans take on the CFPB and the FSOC, which act as regulators to monitor any potential threats to the financial industry. Via budget reconciliation, the GOP can seize control of these regulators’ funding.
The CHOICE Act
Last Congress, House Financial Services chair Jeb Hensarling introduced his Financial CHOICE Act, a sweeping bill which would repeal the staple Volcker Rule, the Durbin Amendment, which limits how much a retailer can be charged on debit card transactions, and restructure the edifice in DFA Titles I and II to address systemic risk. Major countervailing forces against wholesale charges to DFA:
- this route would require some Democrats vote for it in order to meet the 60 vote threshold
- the banking lobby is also not completely on board with the CHOICE Act, as some have suggested that they would prefer specific accommodations as they have already adjusted to many Dodd-Frank regulations
The Choice act is the most serious of the vehicles to curtail DFA m. This could act as a full “repeal and replace” in financial regulation, and Rep. Hensarling is hoping that the Trump administration will revive this legislation. Hensarling has indicated that he hopes to get his bill passed this year, effectively undermining some of the most vital elements of DFA. Democrats have to sign on to this bill to pass given the 60 vote threshold and they have shown no interest in doing so, with Democratic Representative Maxine Waters saying that Hensarling’s legislation is “so bad it simply cannot be fixed.”
It would seem the GOP can finally have its say in financial regulation and overhauling the disdained Dodd-Frank Act. If the party was given cold feet about reforming the ACA, it may beat a similar retreat when the GOP leading effort against DFA — which enjoys about 70 percent support among the public — can easily be framed as Wall Street’s Financial CHOICE.