Dodd-Frank In 2013: How Congressional Changes Will Impact Reform

How will the new Congress impact the Dodd-Frank Act? 

It’s a hugely important question to those in the payments industry, and one with a multi-faceted answe, but a recent American Banker survey of industry voices may help to provide some clues.

While myriad factors will come into play, one theme rang true for many of the respondents: lawmakers with big personalities could come to shape the year.

“Very clearly to my mind, personalities have had a big effect on the banking committees over the year – personalities of the leaders,” said Oliver Ireland, a partner from the law firm Morrison & Foerster.

“If you look at [Rep. Barney Frank, D- M.A.], he had a definite style and point of view on things, and I think that showed through. I think we need to see how those develop going forward.”

American Banker points out some of the newest names who could come to have a big impact on House and Senate committees.

Rep. Jeb Hensarling, R-T.X., is slated to be the new chairman of House Financial Services, and is a known free-market advocate. Rep. Maxine Waters, D-C.A., is the ranking member of the committee, and it may be difficult for the two to form a working relationship.

Sen. Michael Crap, R – I.D., will serve as the ranking Republican on the Senate Banking Committee, and has been vocal about his goals.

“I would hope that we’ll be dealing with GSE reform, there’s some refinement and oversight that needs to be conducted with respect to Dodd-Frank, and I personally want to see if we can focus on trying to help improve capital formation in the markets generally,” he said.

And finally, another big personality who could impact Dodd-Frank reforms is Sen. Elizabeth Warren, the newly elected Democrat from Massachusetts with a reputation for being tough on big banks.

“Elizabeth Warren was pretty hard on big banks and bailouts. Is she going to bring that same attitude to Fannie and Freddie? I’m not convinced she won’t,” said Mark Calabria, director of financial regulation studies at the Cato Institute. “If she gets behind GSE reform, it certainly gives other Democrats some cover.”

But Democrats aren’t the only ones who will likely be pushing for a tough line on financial giants. Rep. Steve Pearce, R-N.M., said he’d like to see more done in cases such as HSBC’s money laundering charge from the Department of Justice.

“It’d like to see that somebody’s held accountable on some of these things,” Pearce said. “I would like a little fairness in the playing field – somebody that recognizes the small rural areas of the nation and holds accountable MF Global, HSBC.”

While many are, in the words of American Banker, expecting the year to be “characterized more by industry oversight than major legislative items,” others seek to push more bipartisan legislation through.

One recent example of such an effort came in December, when the Senate unanimously passed a bill to better protect the information that banks must share with the CFPB.

“The election confirmed Dodd-Frank for good or for bad,” Calabria stated. “Its defenders can move away from a defensive posture and start talking about making it work better. I expect significant discussions and tweaks along those lines.”

To read more opinions on how a new Congressional Agenda will impact the Dodd-Frank Act, read the full American Banker piece here.

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