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Former Federal Reserve Chairman Alan Greenspan said sweeping post-crisis reforms of the U.S. financial system haven’t fixed the problem they were designed to tackle and should be scrapped, escalating his long-standing criticism of the 2010 Dodd-Frank Act, Bloomberg News reported yesterday. Greenspan’s hands-off approach while he helmed the U.S. central bank was blamed by many critics for fostering conditions that incubated the global financial crisis. While Greenspan said in 2008 that his free-market ideology shunning regulation was flawed, he has for years been skeptical of Dodd-Frank, enacted after the turmoil to make banks stronger and subject to better oversight. U.S. Treasury Secretary Jacob J. Lew, in separate remarks on Thursday, said that Dodd-Frank had made the financial industry safer. “It would be a mistake to roll back the clock on these protections,” he said in testimony to Congress.

The House Financial Services Committee yesterday approved a bill to roll back significant portions of the financial-crisis-era overhaul known as the Dodd-Frank Act in a vote that was largely down party lines, the New York Times reported today. The legislation, the Financial Choice Act, is not expected to be adopted this year, but it could influence the broader debate over financial reform and provide a starting point for its sponsor, Jeb Hensarling (R-Texas), the chairman of the House Financial Services Committee, whose leadership role on the panel is set to end in two years. Hensarling has been a prominent critic of Dodd-Frank and other changes after the 2008 financial crisis, including the creation of the Consumer Financial Protection Bureau to regulate the consumer finance industry. The legislation, which was unveiled in June, calls for numerous changes to Dodd-Frank. One provision would allow some of the largest banks to exempt themselves from some regulatory standards if they maintained an important ratio of capital to total assets at 10 percent or more. The bill would also repeal the Volcker Rule, which aimed to stop banks from making risky bets with their own money, and replace regulators’ authority to wind down troubled banks with a new chapter of the Bankruptcy Code. In addition, it would remove the Durbin Amendment, which set a limit on certain fees retailers are charged for debit card transactions.

A tripling of student debt over the past decade to more than $1.3 trillion has unleashed a torrent of Washington, D.C., lobbying from outside the education sector, with various industries describing a “crisis” requiring federal intervention, the Wall Street Journal reported today. Real estate agents, farmers, architects, startup lenders, lawyers, tech companies, benefits administrators — even podiatrists — have sent lobbyists to Capitol Hill over the past two years to push for legislation to forgive or at least reduce what workers and consumers owe on their student loans. The efforts reflect the federal government’s unique position as the nation’s primary lender to college and graduate students. Its student-loan portfolio — topping $1 trillion — is big enough to rival the holdings of some banks, but it is controlled by elected leaders who are subject to the kind of political pressure that private lenders aren’t. And while colleges and universities have long been a big lobbying presence on Capitol Hill, increasingly the pressure is coming from the private sector.

The House on Friday passed a bill that would lift some reporting requirements for private equity firms, part of Majority Leader Kevin McCarthy (R-Calif.)’s initiative to support small business innovation, MorningConsult.com reported. Lawmakers passed H.R. 5424 in a 261-145 vote, attracting support from 35 Democrats, even though the White House issued a veto threat. “The exemptions that this bill provides would enable private fund advisers to slip back into the shadows. H.R.5424 unnecessarily puts working and middle-class families at risk while benefitting Wall Street and other narrow special interests,” the White House said in a statement on Tuesday. Industry groups praised the bill’s passage, saying that the legislation would provide regulatory relief to private equity investors and boost the economy.

Six years after Dodd-Frank’s passage, private equity firms are now lobbying Congress to undo some of the recent requirements — and the House of Representatives appears poised to do so, the New York Times reported today. The House is scheduled today to vote on the Investment Advisers Modernization Act of 2016, a bill championed by the private equity industry’s trade group. The bill would maintain important components of Dodd-Frank — there would still be federal exams of private equity firms, which manage money for pension funds and other large investors. Yet it represents a significant challenge for Dodd-Frank’s staunchest supporters, who denounced the new bill for, among other things, loosening the requirements on what information the industry must report to regulators about the nature of its investments. Read more.

In related news, the House Financial Services Committee next week will begin its markup of the Republican plan to roll back the 2010 Dodd-Frank law, according to a committee announcement, MorningConsult.com reported yesterday. The Tuesday markup will be the beginning of an effort to “debate the Financial CHOICE Act, consider possible amendments and vote on the legislation,” the announcement said. A discussion draft of the law that Committee Chairman Jeb Hensarling (R-Texas) rolled out over the summer is almost 500 pages and contains provisions most Democrats oppose. Jeff Emerson, a spokesman for the committee, told Morning Consult that the panel is holding open the possibility that the markup could last longer than one day. Hensarling has not yet formally introduced the CHOICE Act, and Emerson said the legislative text “is being finalized now.” Read more. 

The House of Representatives is pushing to enact a bankruptcy act for banks that has several concerning features that could make bailouts more likely, not less likely, according to a commentary by Profs. Mark J. Roe of Harvard Law School and David A. Skeel Jr. of the University of Pennsylvania in the New York Times DealBook blog. It has passed a bankruptcy-for-banks bill, sent it to the Senate, and now embedded it in its appropriations bill, meaning that if Congress is to pass an appropriations bill this year, it may also have to enact the bankruptcy-for-banks bill. In concept, the professors say that bankruptcy for banks makes sense, even if it offers the benefits of government bailouts that industrial companies rarely receive. After all, a bank failure can bring down the economy, while an industrial failure cannot. But if banks can be reorganized in bankruptcy, the possibility of a win-win result is in the cards. It should be possible to restructure a big bank to stop it from damaging the economy without having to bail it out. First and most problematic about the bill, Roe and Skeel said that only the bank and not the regulator can make the bankruptcy happen. If the regulators think that a bankruptcy is needed, but that a bailout or alternative resolution process is not needed, they cannot directly force a filing.

A trade association that represents the largest U.S. commercial banks is backing legislation aimed at ending anonymous shell companies, The Hill reported today. "We believe the bill would assist public sector efforts to identify money laundering and terrorist financing through the disclosure of the beneficial owners of corporations," The Clearing House Association said in a letter on Monday to the sponsors of the legislation: Sen. Chuck Grassley (R-Iowa), Sen. Sheldon Whitehouse (D-R.I.), Rep. Pete King (R-N.Y.) and Rep. Carolyn Maloney (D-N.Y.). Under current law, companies do not have to disclose to state governments their true owners at the time that they are incorporated. The legislation would require companies to report ownership information at the time of incorporation and when there is a change in ownership.

Republican National Convention delegates approved a platform yesterday that calls for reinstating the Glass-Steagall Act and scaling back the Dodd-Frank financial overhaul, Bloomberg News reported. The Glass-Steagall measure puts presumptive presidential nominee Donald Trump and his party in the company of unlikely allies such as Bernie Sanders, who ran against Democrat Hillary Clinton on a plan that included Glass-Steagall reinstatement, underscoring the blurring of political lines in the 2016 race. The platform also embraces Trump's stance on international trade, saying that trade agreements — such as the Trans-Pacific Partnership negotiated by the Obama administration, though an explicit reference to that deal was removed — should not be rushed.

Sens. Orrin Hatch (Utah) and Marco Rubio (Fla.) will be Senate Republicans’ representatives on a bicameral task force charged with coming up with methods to help Puerto Rico emerge from its debt crisis, MorningConsult.com reported on Frday. Rep. Nydia Velázquez (D-N.Y.) and Puerto Rico’s non-voting representative in Congress, Pedro Pierluisi, will represent House Democrats. Senate Majority Leader Mitch McConnell (R-Ky.) on Friday appointed the two senators to the task force, which is separate from the fiscal oversight board established by the recently passed law to address the island’s debt crisis. Senate Minority Leader Harry Reid announced last week his appointment of Sens. Bill Nelson (Fla.) and Robert Menendez (N.J.) to the task force. President Obama on June 30 signed into law the Puerto Rico Oversight, Management and Economic Stability Act, also known as PROMESA. The congressional task force it established is required to complete a report on the causes and possible solutions to the crisis by the end of 2017. House Speaker Paul Ryan on Friday appointed Rep. Sean Duffy (R-Wis.), the bill’s lead sponsor, and Rep. Tom MacArthur (R-N.J.). Read more. 

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.