With the recent Senate vote on banking reform, Republicans are finally starting to push back on the Obama administration’s proposed regulatory overhaul of the financial system.
The Senate voted Wednesday to advance the measure to the House.
In a rare show of bipartisanship, the Senate voted to send it to the White House for a simple majority.
With the GOP in charge of both houses of Congress, the banking reform bill will likely receive broad bipartisan support in both chambers.
The measure is not a replacement for the Dodd-Frank financial reform law, but it would streamline the process for banks and other financial institutions to refinance their toxic debt.
It also would require a host of changes to banking regulation to ensure banks are complying with federal regulations and not simply following the whims of a few political leaders.
“It will require significant changes to existing financial regulation in order to make sure that banks can operate as they see fit and be able to function in the 21st century economy,” said Sen. Richard Shelby (R-Ala.), who chairs the Banking, Housing and Urban Affairs Committee.
“But the goal of this bill is to make it easier to do business with the banks, to make banks more resilient to new threats, to give them more flexibility, and to make them more accountable.”
The bill would require the Federal Deposit Insurance Corporation to set aside money for banks to refloat their toxic loans.
That money would come from deposits in the FDIC’s Bank Holding Company Account.
The bill also would force banks to set up a special savings account for customers who are unable to repay their loans.
The bank holding company would then be required to invest the money in the bank’s primary investment vehicle, which is a bond.
The savings account would be used to repay loans that are considered high-risk or that are subject to high fees.
Banks could also be required by the bill to invest in the National Credit Union Administration’s (NCUA) new High-Volatility Asset Class Fund.
Under the bill, NCUA would be allowed to invest up to $50 billion in high-yield securities, which would allow banks to hold on to those bonds for up to 20 years.
The legislation also requires banks to have at least 50% of their assets in cash.
The House bill does not explicitly say that banks must make this investment, but in order for banks like Ally to do so, they would need to make at least $1.5 trillion in investments in cash within 10 years.
“The bill is not intended to create a bailout for the banks,” Shelby said.
“There are not going to be any bailouts of the banks.
But I think there are ways that we can be better able to manage the financial markets, and that’s what this bill aims to do.”
The Senate bill is expected to pass both chambers of Congress on Thursday.
The Banking Committee will hold a markup of the bill on Thursday morning.
This story has been updated to include additional comment from Sen. Shelby.