More than six years after the credit crisis paralysed and a slew of strict banking regulations, the Congress is finally planning to relax the regulations as many believe that the financial sector is in better hands at the current moment. The rules were considered to be the strictest since the 1930’s according to many analysts on the street and made many believe that laws were hurting the growth trajectories of financial institutions. It is imperative to state the bill was introduced in the Republican controlled house though it is possible that President Obama might use his veto powers and strike down the bill if presented to him after being passed in both the Houses.
According to the reports, the bill would try to alter few parts of the Dodd-Frank 2010 legislation. Most notably it would give banks another 2 years until 2019 to ensure that their holdings of certain risky and complex securities don’t put them out of compliance needs that are required under law which is being seen as a huge positive for banks in the economy. The democrats in the house denounced the bill saying that it would provide too much leeway to the banks which hold a large amount of the said securities.
The bill would also revise the so-called Volcker Rule which was a key part of the financial overhaul. The Volcker rule had restricted the abilities of banks from taking riskier bets. Many democrats believe that relaxation of norms would be detrimental in environment wherein the economy is still weak. Whereas many on the Republican side believe that since banks play a very important role in helping the economy recover, a strict set of rules would not allow banks to provide the requisite amount of credit that is required by businesses in the near term which would be a huge negative.