Having passed the House , the Promoting Job Creation and Reducing Small Business Burdens Act, H.R. 37, a bipartisan piece of legislation containing a number of Dodd-Frank corrections and job creation measures, heads to the Senate where it faces an uncertain future. The vote in the House was 271 to 154, with 29 Democrats voting for the measure. However, there was strong opposition to the bill, especially a provision giving Volcker Rule relief to certain debt securities of collateralized loan obligations (CLOs). Joseph Lynyak II, a partner at the international law firm Dorsey and Whitney (D.C.office) in its Finance & Restructuring Group, described H.R. 37 as a quintessential technical corrections bill.
Title VIII of the Act, which is the Restoring Proven Financing for American Employers Act, which provides Volcker Rule relief for certain debt securities of collateralized loan obligations (CLOs), has become something of a lightning rod for opposition to the entire bill. It was prominently mentioned in the President’s veto message on H.R. 37 and in remarks on the House floor by Rep. Maxine Waters (D-CA), the Ranking Member of the House Financial Services Committee. This opposition comes against the backdrop of the strong bi-partisan support that this provision received as a stand alone bill in the 113th Congress. That bill, H.R. 4167, was favorably reported out of the Financial Services Committee by a vote of 53 to 3.and later passed the full House on a voice vote.
Mr. Lynyak described opposition to the Volcker Rule provisions as more political than policy-based. He agrees with the House floor statement of Rep. Andy Barr (R-KY), the author of the provision, that the CLO provision represents a small and commonsense solution, not a rollback of Dodd-Frank by any means. It keeps the Volcker rule completely intact and simply provides phased-in compliance to banks of all sizes that made sound investment decisions, allowing for a finite universe of well-performing legacy CLOs to be sold or paid off.
Senator Richard Shelby (R-Ala), incoming Chair of the Banking Committee, has not issued a statement on H,R. 37, but he is known to favor Dodd-Frank technical corrections. In the 113th Congress, Senator Shelby introduced two legislative proposals aimed at clarifying and streamlining the implementation of the Dodd-Frank Act. But Senator Elizabeth Warren (D-MA), a key member of the Banking Committee, is likely to rally opposition to Dodd-Frank changes, particularly any changes in the Volcker Rule.