Congressional Budget Office Says Dodd-Frank Rollback Would Slash $24 Billion From Deficit

The Street - Emily Stewart - 21 May 2017

A House Republican proposal to repeal the banking crisis-era Dodd Frank Act would slash the federal budget deficit by $24 billion over a decade, according to the Congressional Budget Office.

The nonpartisan budget agency released its estimates of the effects of the Financial CHOICE Act, a Dodd-Frank overhaul bill presented by House Financial Services Committee Chairman Jeb Hensarling (R-Texas) this week. It projects the legislation would reduce federal deficits by $24.1 billion from 2017 to 2027, mainly by eliminating a body designed to handle major financial institutions that are failing and changing the way a consumer protection watchdog is funded.

A House Republican proposal to repeal the banking crisis-era Dodd Frank Act would slash the federal budget deficit by $24 billion over a decade, according to the Congressional Budget Office.

The nonpartisan budget agency released its estimates of the effects of the Financial CHOICE Act, a Dodd-Frank overhaul bill presented by House Financial Services Committee Chairman Jeb Hensarling (R-Texas) this week. It projects the legislation would reduce federal deficits by $24.1 billion from 2017 to 2027, mainly by eliminating a body designed to handle major financial institutions that are failing and changing the way a consumer protection watchdog is funded.

Hensarling in a statement on Friday touted the bill and CBO score: "The Financial CHOICE Act is not what Wall Street wants, but it is what Main Street and hardworking taxpayers need," he said.

Hensarling said Dodd-Frank gives big banks a "competitive advantage" and his legislation will help community banks and local firms. The CBO said the nation's eight largest banks--JPMorgan Chase (JPM) , Citigroup (C) , Bank of America (BAC) , Goldman Sachs (GS) , Morgan Stanley (MS) , Bank of New York Mellon (BK) , State Street (STT) and Wells Fargo (WFC) --would be unlikely to take advantage of provisions in the bill that would allow banks to opt out of regulations if they maintain a more-than-10% leverage ratio, meaning how much debt is used to fund assets.

The agency said that, instead, smaller institutions would seek to meet the 10% requirements to reap the benefits. It also estimates that most institutions that choose to main that leverage ratio would have assets below $10 billion.

President Trump has said he plans to "do a number" on Dodd-Frank, though it is highly unlikely the Senate could reach the 60-vote threshold necessary to repeal the legislation entirely. In April, he signed a pair of executive memoranda taking aim at the law, including one instructing the review of the orderly liquidation authority.

Treasury Secretary Steven Mnuchin has come out in support of the CHOICE Act. 

"I applaud the steady commitment and leadership that Chairman Hensarling and his colleagues have provided on these issues, and welcome the reintroduction of the CHOICE Act," he said in a statement in April. "While I continue my work to implement the President's executive order setting the core principles for financial regulation, I look forward to working with Congress to both support and strengthen our financial system and safeguard taxpayers."