Treasury Secretary Steven Mnuchin on Thursday said he would soon formally call for rolling back regulations on thousands of small and regional banks, arguing that major changes were necessary to help these companies make more loans and boost the economy.
Testifying before the Senate Banking Committee, Mnuchin previewed two specific recommendations he plans to make in the first of several reports to President Trump next month.
He said he would call for exempting all banks with less than $10 billion in assets from rules under the 2010 Dodd-Frank financial overhaul law. The vast majority of banks have less than $10 billion of assets, and they often complain about excessive regulation.
The second change Mnuchin said he was expecting to recommend would allow many regional banks to escape tighter regulatory scrutiny by raising the $50 billion asset threshold that automatically triggers tougher oversight. He didnt say, though, what threshold he might recommend.
This is not about rolling back regulation for big banks, Mnuchin said. This is about making sure that small, medium-size businesses, homeowners, have access to … credit.
Mnuchin also seemed to back away from past comments from Trump and some in the Republican Party who have called for breaking up the countrys largest banks by reinstating a version of the Glass-Steagall Act, which separated commercial banks from investment banks. Mnuchin said such a law would hurt companies and access to credit, sparring with Sen. Elizabeth Warren (D-Mass.) who is a proponent of the change.
We never came out and said we should separate banks from investment banks, Mnuchin said.
This is just bizarre, Warren later responded.
His comments came during a wide-ranging and often combative hearing, during which he defended the White Houses tax proposal, distanced himself from at least one part of Trumps budget plan, and locked horns with Warren and other Democrats.
But a chief focus was on his review of banking regulations, which was spurred by an executive action Trump signed shortly after taking office. The White House believes that banking rules are strangling the banking industry and hurting economic growth, but many Democrats warned Mnuchin on Thursday that rolling back regulations could lead to another financial crisis.
And several Democrats accused Mnuchin of meeting extensively with bank executives as part of the review, disregarding the views of consumer groups that might argue for tighter controls. Mnuchin said he would only share a list of people he was meeting with if it was kept confidential.
On the White Houses plan to overhaul the tax code, Mnuchin said the White House wanted to lower rates for businesses and individuals and lure companies back to the United States, creating more tax revenue.
But he was attacked several times by Democrats who alleged the White Houses plan would lead to less revenue coming into the government, growing the debt. Mnuchin said tax cuts would lead to more economic growth, creating more revenue, an economic theory popular with conservatives known as dynamic scoring.
Im very suspicious of dynamic scoring, because its been done before, Sen. Jon Tester (D-Mont.) told Mnuchin.
Mnuchin told lawmakers that Treasury planned to release its own estimate of the positive economic impacts of its tax-cut plan, which would contain different projections from the Congressional Budget Office and the Joint Committee on Taxation. The estimates from CBO and JCT are often the guideposts that frame how tax changes are adopted.
In a rare break from other White House officials, Mnuchin said he shared Democrats concerns about the Trump administrations proposal to eliminate all funding for community development financial institutions. Under a version of the White Houses budget, which was released in March, federal funding for these organizations would be eliminated. Mnuchin said it was a way to save money so that they could spend more on the military, but he told Sen. Robert Menendez (D-N.J.) that I do share your concerns on this.