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GOP Rep. Jeb Hensarling proposes overhaul of Dodd-Frank

The chairman of the House Financial Services Committee told CNBC on Tuesday the 2010 Dodd-Frank Act has stifled economic growth and institutionalized "too big to fail" banks. That's why Rep. Jeb Hensarling said he is seeking to wipe out or remake large parts of the Democrats' signature financial industry regulatory achievement.

Hensarling, R-Texas, made his comments ahead of an appearance at the Economic Club of New York, where he plans to outline legislation that would undo key parts of Dodd-Frank and overhaul and rename the Consumer Financial Protection Bureau.

The Financial Choice Act would repeal the Volcker Rule, which bans banks from making speculative bets with their own accounts, according to details of the plan released before Hensarling's speech. It would remove the Financial Stability Oversight Council's authority to deem financial institutions systemically important and give banks the option of holding high levels of capital instead of complying with liquidity standards enshrined in Dodd-Frank and Basel III.

"We believe that we need a banking system that has a federal safety net that has a whole lot more capital and a whole lot less federal control," Hensarling told CNBC's "Squawk Box."

Under Hensarling's legislation, the CFPB would become the Consumer Financial Opportunity Commission, replace the single director with a five-member bipartisan commission, and be tasked with a dual mandate to protect consumers and competitive markets.

Extending the commission's mandate is necessary because "part of consumer protection is protecting the economic choices and vibrant competitive markets," Hensarling said.

The Financial Choice Act also contains provisions that would force regulators to conduct a cost-benefit analysis for any proposed rules, increase penalties for financial crimes and extend regulatory relief to community banks.

The plan has little chance of passing while President Barack Obama remains in office. Nor would it likely pass under an administration led by Hillary Clinton, who secured enough delegates to clinch the Democratic nomination by Monday evening, according to NBC News.

Hensarling said he has not yet spoken to Donald Trump about the plan but said he hopes to provide the presumptive Republican presidential nominee with legislation to overhaul Dodd-Frank. Trump has said he would scale back regulation if elected president.

"Not unlike many Republicans, I've certainly had my disagreements with Donald Trump. But at least one thing is I know — he's working on a very solid tax plan and he also realizes that Dodd-Frank has hurt working Americans and that it's broken its promises," Hensarling said.