Maxine Waters has a clear message for the banking industry: once she becomes chair of the powerful House committee on financial services, there will be no more easing of bank regulations.
“Make no mistake,” Waters said in the first committee hearing since the midterm election where Democrats won the House. “Come January in this committee, the days of this committee weakening regulations and putting our economy again at risk of another financial crisis will come to an end.”
Waters has been a vocal critic of Congressional efforts to revise the post-crisis Dodd-Frank financial regulatory framework, a law that some policymakers criticize as being too restrictive on the banking industry.
Earlier this year, a handful of moderate Democrats teamed up with the GOP to pare back portions of the Dodd-Frank law, which broadly offered regulatory relief to institutions with less than $250 billion in total assets.
The Fed, which now has Trump-appointee Randal Quarles in charge of banking regulation, has since extended regulatory relief to some banks above that threshold. As a result, U.S. Bancorp (USB), PNC Financial (PNC), Capital One (COF) and Charles Schwab (SCHW) will also see less red tape on their liquidity and funding requirements.
‘Let’s keep them confused. I like it that way.’
Quarles, who testified to the Financial Services Committee on Wednesday, insisted that the proposal is part of the Fed’s efforts to consider “other indicators of risk beyond size” in its regulatory framework.
Waters described Dodd-Frank rollbacks as “harmful” and blamed the Fed, which now has only one Obama-era appointee left on its Board, for supposedly weakening capital standards on the largest banks. Quarles maintained that the banks still have liquidity and capital above pre-crisis levels and said the proposals are aimed at reducing compliance burden.
Waters and the Democrats face an uphill battle if they try to undo the regulatory changes done in the first two years of Trump’s presidency. The Dodd-Frank rollbacks are already being enacted by the Fed and the other banking regulators, which are led by Trump-appointees. But the main obstacles are a Republican-controlled Senate and a Trump veto that would make it difficult for House Democrats to pass legislation.
For her part, Waters expressed interest in working with Republican colleagues to get work done. She said Wednesday that the press and the public at large are confused about whether or not Waters is capable of bipartisanship, acknowledging that the expectation is for her to butt heads with the GOP more than she cooperates with them.
“Let’s keep them confused,” Waters said. “I like it that way. As a matter of fact, the more confused they are, the better I have an opportunity to have some wins.”
Texas Republican Jeb Hensarling, the current chair of the House Financial Services Committee, said he appreciated the few moments where he and Waters were able to agree on some issues. Hensarling extended an olive branch as the current Congress gets ready to wind down.
“Privately I told her the majority side stands ready and prepared to do everything possible for there to be a peaceful transfer of power on this committee,” Hensarling said.
Hensarling is retiring from the committee, which means a new Republican will have to lead the charge on the minority side. North Carolina Republican Patrick McHenry, who once had higher ambitions for House GOP leadership, has announced his intention to run for top Republican on the financial services committee.
“I am fully prepared to fight back against any efforts by Democrats to use this committee to rollback our successes from the last two years or use the committee as the launch pad for endless, partisan investigations,” McHenry said in a statement November 8. Waters has threatened to use the committee gavel to issue subpoenas to financial institutions regarding Trump’s business dealings.
Brian Cheung is a reporter covering the banking industry and the intersection of finance and policy for Yahoo Finance. You can follow him on Twitter @bcheungz.