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The midterm elections are almost upon us and with Republicans poised to take control of the House of Representatives, we thought it a good time to gauge what this might mean for the Dodd-Frank law.

In the House, two lawmakers are likely to lead any effort to roll back or limit the new financial regulations: Spencer Bachus of Alabama, the ranking Republican on the House Financial Services Committee, and Ed Royce of California, seen as a rising star on the committee and a possible challenger to Bachus for the chairmanship.

Both vigorously opposed the bill as it was being debated earlier this year.

Dodd-Frank “gives tremendous discretion to what we call federal bureaucrats, to unelected agencies and individuals in Washington,” Bachus told Politico.

“Instead of learning from the failures of 2008, the legislation [compounds] the moral hazard problem,” Royce wrote in an editorial for The Heritage Foundation.

With Dodd-Frank a reality, and with calls to repeal the law probably wishful thinking, Bachus, Royce and other Republicans will instead likely try to limit implementation and battle some key provisions that they see as most onerous.

Ending too big to fail

Bachus complained throughout the debate over financial reform that the new Financial Stability Oversight Council would serve to institutionalize bailouts. He said the council enables “back-door bailouts.” Bachus and other Republicans have said that no financial institution should be propped up by the federal government, no matter the size. They have called for changes to the bankruptcy code that would make it better suited for dissolving complex institutions.

In a recent interview with the American Banker, Royce cited another danger: systemically significant companies enjoy a lower cost of capital, and thus a competitive advantage over smaller banks, because the market sees them as too big too fail.

Royce also objects to a provision that allows the Federal Deposit Insurance Corp. to treat creditors with similar claims differently. “The creditors to the largest systemically significant institutions know that their likelihood of being rescued in a liquidation is much higher than the creditors to smaller institutions that would be resolved through bankruptcy,” he said.

Say no to Volcker

The Volcker Rule, named for former Federal Reserve Chairman Paul Volcker, requires federally insured banks to spin off most of their proprietary trading operations including hedge funds. During debate, Rep. Bachus sought to condition the rule on other countries adopting similar measures, but that effort failed. But there is still plenty of room to influence implementation of the measure.

Michael Lewis recently wrote about how banks are trying to sidestep the proprietary trading ban by exploiting rules that allow them to make bets on derivatives or other securities if they do it on behalf of clients.

The provision’s namesake, meanwhile, is privately urging administration officials to adopt something akin to anti money-laundering laws, where the government bans a behavior then puts the responsibility on banks to comply with the rules, according to a story today in the Wall Street Journal.

Bachus hasn’t said yet what he would do to limit the Volcker Rule, but he has made a point of his opposition to Dodd-Frank in speeches before financial lobbyists. Bachus recently told financial lobbyists that Republicans deserve more of their political contribution money because Dodd-Frank “hammered them.” Bachus raised $218,000 in 2009 and 2010 from the securities and investment industry and $1.35 million in the last election cycle in PAC money, with the biggest donations coming from banks.

Limit reach of consumer financial agency

Republicans derided the Consumer Financial Protection Bureau as a sprawling bureaucracy. Royce recently argued that the bureau does not have to take into account the safety and soundness of financial institutions when writing rules. “If you separate safety and soundness from consumer protection, what you end up with potentially is the model that we had with the government-sponsored enterprises, in which you had bifurcated regulation,” he told the American Banker.

Congressional Republicans will also have the power to make life difficult for Elizabeth Warren, the Harvard professor and consumer advocate who will effectively head the agency.

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