A decade after the federal government rescued the first of many faltering financial firms, the Senate voted on Wednesday to pass legislation that would relax restrictions on large parts of the banking industry, representing the most significant changes to the rules that were put in place after the 2008 financial crisis.
In a rare showing of bipartisanship, the Senate voted 67 to 31 to pass the bill, which is intended to help small- and medium-size banks but which critics say is a dangerous rollback of financial regulations intended to prevent another meltdown.
The legislation faces an uncertain fate going forward, as House Republicans are expected to push for a much more expansive rollback of the 2010 Dodd-Frank Act. Senate Democrats who voted for the bill that passed on Wednesday have insisted that major changes along the lines of what the House passed last year will sink the effort.
The bill, which the Senate Banking Committee drafted over several years, would let hundreds of smaller banks avoid some federal oversight such as stress tests, which measure a bank’s ability to weather an economic downturn.
Banks with $50 billion of assets are currently considered “systemically important” and are governed by more stringent regulations. The Senate bill raises that threshold to $250 billion, leaving only a handful of the biggest banks facing the toughest oversight.
Unlike the House bill, the legislation would not touch the Consumer Financial Protection Bureau, a longtime target of Republican lawmakers who view it as an unaccountable agency with too much power.
Representative Jeb Hensarling of Texas, the Republican chairman of the House Financial Services Committee, suggested this month that he did not expect his colleagues to just rubber-stamp the legislation that passed the Senate and that there would be changes to a final bill.
More than a dozen Senate Democrats, several of whom are facing tough re-election contests in states that President Trump won in 2016, backed the banking bill despite public criticism from members of the progressive wing of the party. They have said that they hope to avoid a conference process with the House that could lead to changes that they would find unacceptable.
“If the House overreaches in its effort to amend the Crapo bill, it could slow down the bill’s progress,” said Brian Gardner, an analyst at the financial services firm Keefe, Bruyette & Woods, referring to Senator Mike Crapo, the Republican of Idaho who is a sponsor of the measure.
The passage of the bill in the Senate has exposed deep rifts in the Democratic Party, with Senator Elizabeth Warren of Massachusetts publicly clashing with colleagues like Senator Heidi Heitkamp of North Dakota over what she calls the “Bank Lobbyist Act.”
“What does it say about Washington that Republicans and Democrats can’t come together to support common sense gun reforms or solutions for working families — but can come together to deregulate big banks on the 10th anniversary of the start of the 2008 financial crisis?” Ms. Warren said on Wednesday.
In an interview with The Atlantic this week, Ms. Heitkamp shot back: “I think people in North Dakota don’t care what Elizabeth Warren thinks.”
With the passage of the bill, the onus will now be on House Republicans to decide whether they want to push for more sweeping changes that will appeal to their base or settle for modest adjustments to Dodd-Frank that have a chance of passing and getting to the president’s desk for his signature.