The U.S. Congress on Tuesday agreed to free thousands of small- and medium-sized banks from federal oversight through a stringent 2010 Dodd-Frank law intended to prevent another meltdown, prompting warnings the bill could prove lethal as banks exempted from the law could get away unchecked.
Welcomed by conservatives, the banking reform bill was introduced in 2010 after loose lending and risky maneuvers by financial institutions led in 2008 to the worst recession in the United States since the Great Depression.
Banks with less than US$250 billion in assets from a post-crisis crackdown have long complained about the bill. The Senate first approved it in March with bipartisan support.
With Trump leading the country, the watered-down version of Obama-era rules – passed in the House with 258 to 159 on Tuesday, with almost all House Republicans voting in favor and 33 Democrats voting in favor – is set to become law.
"These banks are back to making record profits, but Washington insists on doing them more favors, even if it means raising the risk of another bail-out," Sen. Elizabeth Warren, D-Mass., told NBC News.
The 2,300-page bill includes new regulatory requirements for banks; the creation of the Consumer Financial Protection Bureau; expansion of oversight of hedge funds and private equity firms; increased bank reporting requirements, and the so-called Volcker Rule.
The bill was set in place to re-establish control over the financial institutions at a time when major banks went bankrupt, markets collapsed and millions of homeowners fell into foreclosure or lost savings.
The federal government fronted trillions of dollars to get the economy going and the Federal Reserve also bought significant financial assets and slashed interest rates to stabilize the situation.
"The US$50 billion trigger was a very important aspect of Dodd-Frank," said Rep. Al Green, who was in Congress when the legislation originally passed. "If we don't regulate the entire system and we try to do this on a piecemeal basis, we will put the entire system at risk."
Paul D. Ryan, the House Speaker and Wisconsin Republican, said the bill would free "our economy from overregulation."
"Our smaller banks are engines of growth," Ryan said in a statement. "By lending to small businesses and offering banking services for consumers, these institutions are and will remain vital for millions of Americans who participate in our economy."