UPDATE 1-Republican leader proposes weakening Dodd-Frank, spotlights U.S. political divide

(Adds delivery of speech, political reaction)

By Dan Freed

NEW YORK, June 7 The chair of the U.S. House
Financial Services Committee on Tuesday proposed wiping out much
of the U.S. regulation put in place after the financial crisis
with a plan expected to ignite debate in the presidential
election but flame out in Washington.

In a sweeping speech at the Economic Club of New York,
Republican Representative Jeb Hensarling, from Texas, laid out
his ideas on weakening the 2010 Dodd-Frank Wall Street reform
law just as polls opened in six states holding presidential
primaries.

Hensarling told the crowd he had not yet consulted with
Donald Trump, the presumptive Republican nominee, but would meet
later in the day with the real-estate tycoon who is also
pressing to dismantle the massive reform law.

Outside more than a dozen protesters chanted “Main Street
not Wall Street” in opposition to Hensarling’s plan.

The plan would allow banks to choose between complying with
Dodd-Frank or holding a much higher amount of capital.

It would also throw out the Volcker Rule that restricts
banks from making speculative investments and eliminate the
authority of the Financial Stability Oversight Council
consisting of regulatory agencies’ heads to designate firms as
“systemically important,” also known as “too big to fail.” That
label triggers requirements to hold more capital and abide by
stricter regulations.

Hensarling said his plan involved “far more loss-absorbing
capital and far less federal control.”

It would also leave the law’s section on derivatives in
place.

“I’m only replacing 89.7 percent of Dodd-Frank,” Hensarling
joked.

Few expect the plan, previewed in a video last week, to
become law soon. While it could pass the Republican-controlled
Congress, it would then have to be signed by President Barack
Obama, who also signed Dodd-Frank into law.

But Obama leaves office in January and the people on the
Democratic side vying to replace him, former Secretary of State
Hillary Clinton and Senator Bernie Sanders, have distinct views
on regulation and the lessons learned from the financial crisis.

“Those on the left who gave us Dodd-Frank believe in the
principle that human nature is self-destructive and that people
– except themselves, of course – are fundamentally ignorant,”
Hensarling said, demonstrating the political charge of his
ideas.

Trump has given few clues to how he would take apart
Dodd-Frank and what he might put in its place. His campaign
declined to comment on Hensarling’s plan. Last week Obama said
Trump would let companies do “the same stuff that almost broke
our economy’s back.”

Meanwhile, Clinton has now secured enough votes for the top
of the Democrats’ ticket. She has proposed edging farther left
of Dodd-Frank to break up large banks that take excessive risk,
charge institutions a “risk fee,” tax high-frequency trading,
and create more oversight of “shadow banking.”

The farthest left of the presidential contenders, Sanders
wants to break up the largest banks, reinstate the
Depression-era Glass-Steagall law that separated commercial and
investment banking, and tax some speculation to pay for college
tuition.

(Reporting by Dan Freed; Writing and additional reporting by
Lisa Lambert; Editing by James Dalgleish)

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Source URL:http://www.reuters.com/article/usa-congress-doddfrank-idUSL1N18Z0LK

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