Bills
| 3.23.22

Loosening Securities Restrictions for (Mainly Big) Banks (H.R. 1841)

Do you support or oppose this bill?

What is H.R. 1841?

(Updated November 21, 2017)

This bill tweaks the fine print of the Volcker Rule—part of a law designed to bar banks from making risky trades with their own money. 

The bill focuses on high-risk CLOs, or collaterized loan obligations, issued before January 31, 2014. CLOs are complex securities that bundle together corporate loans and bonds. The majority are held by large U.S. banks. 

Under the bill, banks and financial companies that own CLOs and are regulated by the Federal Reserve would have until July 2019 to comply with the Volcker Rule with regards to their CLOs.

Argument in favor

Will help diminish unnecessary losses to financial institutions and keep capital flowing to businesses that rely on CLOs for credit.

Argument opposed

Undermines risk protections in Volcker Rule, chipping away at regulatory oversight of the banking industry created post-recession.

Impact

Banks and financial companies that own CLOs; the Board of Governors of the Federal Reserve System.

Cost of H.R. 1841

A CBO cost estimate is unavailable.

Additional Info

In Depth: Sponsoring Rep. Garland Barr (R-KY) explained in a press release after the bill passed the House in 2014 that the bill:

"is a bipartisan clarification that fixes a regulatory problem impacting jobs that support families in Kentucky and across the United States. I am glad that the House has come together to advance this commonsense solution that would ensure American employers are able to obtain affordable financing to expand their businesses and create much-needed jobs for Kentuckians."

On the other side, Rep. Michael E. Capuano (D-MA) opposed the bill, arguing that it was unnecessary because banks can still hold lots of CLOs under the Volcker rule. 
“CLOs are not being killed. They are being limited in a very small way only to target the most risky CLOs. A little limitation is good for the American system.”

Of Note: The vast majority of CLOs are owned by just two banks. According to Americans for Financial Reform, two-thirds of all bank-owned CLOs are owned by JP Morgan and Citigroup.

This bill has been introduced before. In 2014, Rep. Barr introduced the legislation to the House and it passed the House before being stalled in the Senate. 

Media:

(Photo Credit: Flickr user rankinstones)