The Treasury Department on Monday called for scrapping or softening some of the rules for banks and other financial firms put in place after the 2008 financial crisis.
In a nearly 150-page report, Treasury recommends more than 100 changes to financial rules, some of which could have a major impact on the type of credit made available to American families and businesses.
Broadly, the report recommends streamlining supervision of the financial sector and giving political leaders more influence over the process — taking away some power from independent regulators.
Specifically, the report calls says the White House should have the ability to fire the head of the Consumer Financial Protection Bureau — an independent consumer watchdog agency created in 2010 — and giving Congress the ability to slash that agency's budget.
But many of the other recommendations are meant to help eliminate rules that impact small and regional banks, which Treasury officials believe are ensnared by regulations designed for the country's largest lenders.
Treasury Secretary Steven Mnuchin, talking about the report at a congressional hearing, said the focus of the report was "what are the things that we can do to unlock burdensome regulations and overlapping regulations and work with the regulators."
The report is part of a broader debate about how the financial sector should be regulated, and whether current regulations are needlessly hindering economic growth. Many supporters of the current rules believe they protect consumers from abusive lending and have prevented banks from taking on so much risk that they threaten the broader financial sector.
The report stopped short of calling for the repeal of the Dodd-Frank financial regulation law, which the Obama administration and Democrats in Congress pushed into law in 2010. Treasury officials support a House GOP bill that would effectively gut many parts of the law, but Treasury's new list of recommendations focuses on other, targeted changes that could be made in the absence of a repeal of that law.
These include exempting many banks from certain "stress tests" that are supposed to gauge how they would weather future economic strains. It also calls for exempting most banks from a Dodd-Frank provision known as the "Volcker Rule," which essentially limits a company's ability to make certain types of trades.
Treasury stops short of specifying precisely what size bank should have to follow the Volcker Rule. It calls for scaling back regulations, but, in some cases, doesn't give precise recommendations for which banks should face rules and which banks should not.
The banking system is overseen by a patchwork of regulators, many of which have competing interests and overlapping jurisdictions. Before the financial crisis, a number of financial companies took advantage of this phenomenon by playing the regulators off each other and shopping for the lightest approach.
The Dodd-Frank law was supposed to streamline some of this supervision, but it stopped short of a wholesale overhaul, in part because it was too politically difficult.
President Donald Trump — who received the recommendations from Mnuchin in the Oval Office Monday — has called for a complete overhaul of financial-sector rules, saying that restrictions are hurting lending and holding back economic growth.
Trump has previously called Dodd-Frank a "disaster" and said he would do a "big number" on it.
There's debate about whether the banking rules put in place after the financial crisis are preventing banks from lending. Many financial companies, particularly small banks, say they are being smothered with so many regulations that they can't lend. They say this is leading to large-scale consolidation within the industry, as many companies are forced to sell themselves or risk closure.
Those statements, however, are at odds with federal data showing the banking sector is healthy, with a near-record number of outstanding loans extended to borrowers. Federal Reserve data show there was roughly $2.1 trillion in outstanding commercial and industrial loans as of May, more than at any period before the financial crisis.
And total loan and lease balances rose close to $360 billion at the end of March, up 4 percent from one year earlier, according to data from the Federal Deposit Insurance Corp.
Mnuchin, a former banker, has talked about the financial regulations more carefully than Trump. He has called for making changes — some of them substantial — but he has stopped short of calling for gutting all of the new rules. Instead, he has said targeted changes could be done to ease restrictions and fuel more lending, and he outlined many of those changes in Treasury's new report.
And in some cases, Mnuchin is calling for expanding the architecture that Dodd-Frank put in place.
For example, Dodd-Frank created the Financial Stability Oversight Council, which is compromised of the top financial regulators and tasked with monitoring risks that could spark a crisis. The new Treasury report will expand the ability of this council so that it has more power to coordinate how regulations are enforced.
And FSOC would be able to elevate one regulator over the others to take the lead if multiple regulators "have conflicting and overlapping regulatory jurisdiction," according to the report's executive summary.
The report ensures that the CFPB will remain in the crosshairs of lawmakers and the White House in the coming months. The House of Representatives last week passed the Financial Choice Act, which would repeal many parts of Dodd-Frank law. A central tenet of that bill would allow banks to escape many rules if they held a larger cushion against losses.
Treasury's new report alleges that the CFPB needs a "significant restructuring" saying it "was created to pursue an important mission, but its unaccountable structure and unduly broad regulatory powers have led to predictable regulatory abuses and excesses."
The CFPB was designed specifically so that it couldn't be tampered with by lawmakers or the White House. Supporters of the agency say that it has already returned nearly $12 billion to 27 million consumers in the form of refunds, cancelled debt and other relief.
The White House has the power to appoint the head of the agency, but it is funded with money from the Federal Reserve. Its mandate is broad — regulating consumer financial products, but a number of businesses have complained that the agency doesn't have proper constraints and can unfairly restrict certain types of lending.
CFPB's current director, Richard Cordray, has a term that expires in July 2018. Trump will have the power to nominate his successor, and he could pick someone who changes the agency's priorities.
Another one of the proposals will push regulators to change the way the enforce the Community Reinvestment Act, a frequent target of Republicans. CRA, which became law in 1977, is supposed to mandate that banks make loans in communities where they operate, particularly low-income neighborhoods. Instead of gutting the CRA, Treasury will recommend that there be new ways to ensure that money banks lend to comply with CRA is used to help communities and not just satisfy regulatory prescriptions.
Monday's report is one of four that Treasury plans to offer in response to a Feb. 3 White House executive order, which called for Treasury to identify "core principles" for regulating the financial system. Treasury officials have spent several months meeting with more than 500 people as they assembled their recommendations.
Cornelius Hurley, director of the Boston University Center for Finance, Law, and Policy, said there is a great need to review and make changes to financial regulatory laws, but he said the White House should be targeted in the changes it wants to make, saying an overly ambitious effort could backfire.
The Washington Post's Jonnelle Marte contributed to this report.