Crapo Bill

What Is the Crapo Bill?

The term Crapo Bill alludes to an economic bill endorsed into law in 2018 that facilitates a portion of the limitations of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The bill, formally called Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2115), was sponsored by Mike Crapo, a United States Senator (R-ID) and chair of the Senate Banking Committee, and passed the Senate by a margin of 67 to 31 in March 2018.

A portion of the changes presented by the banking bill incorporate raising the asset threshold for banks considered too big to fail as well as requirements for community banks. The bill was approved and endorsed by former President Donald Trump in May 2018.

Understanding the Crapo Bill

The Dodd-Frank Act was passed in 2010 in the wake of the 2007-2008 financial crisis. It consolidated the number of regulatory agencies responsible for financial oversight, increased the amount of capital that banks needed to keep up with as a cushion against market downturns, and required superior standards and levels of transparency. In spite of the fact that it was intended to give relief to consumers, it was met with a ton of resistance. Pundits said the limitations troubled banks and other financial institutions by adding more red tape and pointless regulations.

The Economic Growth, Regulatory Relief, and Consumer Protection Act, or the Crapo Bill, was presented by Republican Senator Mike Crapo of Idaho in November 2017 and became law after it was endorsed by President Trump on May 24, 2018. The principal goal of the bill is to roll back a portion of the regulations put forward by Dodd-Frank. Its primary center is to increase the asset threshold limits that banks must meet before being subject to certain regulations and oversight.

The Dodd-Frank threshold was set at $50 billion, above which banks would be considered too big to fail. The Crapo bill increased this threshold to $250 billion in assets, which just a moderately small number of banks — eminently, Bank of America, Wells Fargo, and JP Morgan Chase — would surpass. While the legislation was sold as a method for aiding community banks, several medium sized banks likewise stand to benefit.

However, that is not all. Other key components of the bill incorporate killing the Volcker Rule for institutions with assets of under $10 billion. This section of the Dodd-Frank Act kept banks from undertaking some activity with their own investment accounts and from dealing with hedge funds and private equity funds. The bill likewise vows to further develop access to mortgage lending for consumers, increases protections for veterans and student borrowers, and improvement for capital creation.

Albeit the Crapo Bill wipes out and changes certain parts of the Dodd-Frank Act, it doesn't rescind it totally.

Special Considerations

Banks that don't meet the threshold of $250 billion will ultimately be exempt from the stress tests managed by the Federal Reserve Board. These tests are intended to estimate the impact a financial shock would have on a bank in view of its risk exposure and reserves. Furthermore, these banks would presently not be required to give a layout of how they would be slowed down in the case that they failed.

Albeit the Crapo bill increases the threshold for banks considered too big to fail, it additionally stretches out an authority to the Federal Reserve with respect to smaller institutions. As per section 401 of the bill, the Fed may, under its attentiveness, consider putting the very limitations that bigger banks face on institutions with assets as low as $100 billion.

Analysis of the Crapo Bill

Dodd-Frank has been over and again reprimanded by the financial industry. Banks campaigned widely to roll back capital and reporting requirements that it considered expensive and onerous, yet proposed legislation would in general lack bi-partisan support. This was frequently due to legislation zeroing in on destroying the Consumer Financial Protection Bureau (CFPB).

One part of Dodd-Frank — the creation of the CFPB — had long bothered a few individuals from Congress as well as financial companies. The CFPB was intended to safeguard consumers from predatory and fraudulent practices taken by banks, [lenders](/loan specialist), and other financial institutions. The agency could likewise levy fines on the off chance that these institutions were found to be making the most of consumers. Since its budget is controlled by the Federal Reserve, advocates say it has been protected from Congressional interfering. Rivals say that this has brought about the CFPB overextending.

Not at all like prior endeavors, the Crapo bill zeroed in on easing bank rules. Nonetheless, pundits of the Crapo Bill contend that reducing the number of banks that face more rigid oversight will increase the chances that banks will fail during a financial crisis later on. They likewise point out that data assortment requirements connecting with mortgages would be loose, allowing smaller banks and credit unions to try not to need to report this data.

Features

• The Crapo Bill is an economic and banking bill that facilitates a portion of the limitations of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
• It additionally disposes of the Volcker Rule and further develops lending conditions for mortgage borrowers, veterans, and student borrowers.
• The bill was brought in 2017 and endorsed into law by President Donald Trump in May 2018.
• The bill increased the threshold for banks considered too big to fail from $50 billion to $250 billion.