Houses passes S.2155, Idaho Sen. Crapo’s banking deregulation bill

The House of Representatives on May 22 passed S.2155, a bill intended to roll back some of the regulations of the Dodd-Frank law for smaller banks, by a bipartisan vote of 258 to 159.

The bill was sponsored by Idaho Sen. Mike Crapo, chairman of the Senate Banking Committee and passed the Senate on March 15 by a bipartisan vote of 67 to 31. Idaho’s two Congressmen, Rep. Raul Labrador and Rep. Mike Simpson, both voted in favor of the bill.

“This step toward right-sizing regulation will allow local banks and credit unions to focus more on lending, in turn propelling economic growth and creating jobs on Main Street and in our communities,” Crapo said in a statement.

It is widely expected that President Donald Trump will sign it, perhaps as soon as within ten days, because he ran on a campaign pledge of gutting Dodd-Frank. When it would take effect is more complicated because the bill has many sections, said Lynn Heider, vice president of public relations for the Northwest Credit Union Association (NWCUA), which represents Idaho credit unions.

Credit unions and banks alike, which had heavily lobbied Congress, lauded the bill’s passage. Formally known as the Economic Growth, Regulatory Relief and Consumer Protection Act, the bill removed some of the more stringent regulations implemented in 2010 in response to the 2008 recession, but which community banks and credit unions found onerous.

“Today’s passage of S.2155 by the House of Representatives was a win for all constituents, families and businesses,” said Trent Wright, president and CEO of the Idaho Bankers Association, calling it “commonsense fixes to ill-fitting financial regulations that have limited the ability of banks to serve their communities.”

The legislation increases, from $50 billion to $250 billion in assets, the threshold at which banks are deemed so big and plugged into the financial grid that if one were to fail it would cause major havoc. Those banks currently are subject to stricter capital and planning requirements.

Also, one provision of the bill will classify credit union loans on 1-4 unit rental housing as real estate loans instead of business loans, freeing more capital for loans to Main Street businesses, according to the NWCUA. Northwest credit unions have $1.3 billion invested in loans on that type of housing, said Troy Stang, president and CEO of the organization.

In another example, Dodd-Frank had doubled the amount of data that banks had to collect to offer a loan, from 24 data fields to 48, covering demographic areas such as sex and race. S.2155 said that banks that originate fewer than 500 loans per year were exempt from the new data requirements. Dodd-Frank also implemented more stringent capital requirements, which would be rolled back for community banks under S.2155.

Critics of the bill said it doesn’t really address the problems community banks face, and at the same time it takes away tools from regulators. In addition, because the bill raises the threshold for banks that are subject to enhanced regulatory standards from $50 billion to $250 billion, some are concerned that smaller banks might be more subject to mergers and acquisitions because of the higher ceiling – actually resulting in fewer community banks.

The Associated Press contributed to this story.