17 Democrat Senators voted to roll back parts of Dodd-Frank banking law,adopted in the wake of the 2008 financial crisis.
The Senate on Wednesday passed sweeping changes to a swath of rules adopted in the wake of the 2008 financial crisis.
Nearly a decade after the financial crisis, the Senate advanced the most significant changes yet to the 2010 Dodd-Frank regulatory reform law.
The measure crafted by Idaho Sen. Mike Crapo, the top Republican on the Senate Banking Committee, passed 67 to 31, marking a rare occurrence of old-fashioned legislating on a bipartisan bill that nevertheless sharply divided Democrats.
The legislation will now move to the House, where it will need to be reconciled with possible fixes proposed by Rep. Jeb Hensarling, chairman of the House Financial Services Committee.
A White House press secretary said in a statement that President Donald Trump supports Crapo's bill and would sign it into law. Still, the White House left the door open to possible changes that could be made by House lawmakers as long as the bipartisan bill reaches the president's desk "as soon as possible."
The proposal provides long-awaited relief to thousands of community banks and dozens of regional lenders including Zions Bancorp, BB&T and SunTrust. It will also loosen regulations for mortgage lenders, expand access to free credit freezes for Americans and change rules for student loan defaults.
"This bill shows that we can work together and can do big things that make a big difference in the lives of people across this country," said Crapo on the Senate floor ahead of the vote.
The bill's passage was a defeat for progressive Democrats, who strongly opposed easing regulations for some banks, warning that doing so would likely trigger another financial crisis.
"This legislation threatens to undo important rules protecting us from risk," Sen. Sherrod Brown, the top Democrat on the banking panel, said earlier this week on the Senate floor. "This legislation again puts taxpayers on the hook for bailouts."
Progressives pointed to several critical changes in the bill that would release more than two dozen regional banks from stricter oversight by the Fed and would make it easier for Wall Street banks to fight off existing regulations.
"Buried down in the details of the bill are more landmines for American families" Sen. Elizabeth Warren, a Massachusetts Democrat, said on the Senate floor ahead of the chamber's vote. "Washington has become completely disconnected from the real problem in people's lives."
The bill raises the threshold at which banks are considered too big to fail. That trigger, once set at $50 billion in assets, would rise to $250 billion. It would leave only a dozen US banks -- including JPMorgan Chase, Bank of America and Wells Fargo -- facing the strictest regulations.
The measure would also shield more than two dozen banks from some Fed oversight under the 2010 Dodd-Frank regulatory law. Those banks would no longer be required to have plans to be safely dismantled if they fail. And they would have to take the Fed's bank health test only periodically, not once a year.
Moderate Democrats accused progressives of overstating provisions in the bill and the likely impact it could have on the economy. Instead, they argued they have to respond to the distinct political and banking needs in their states, which they say have been hurt by consolidation in the banking industry since the law was passed.
"They don't understand where we live," said Sen. Heidi Heitkamp, a moderate Democrat from North Dakota who is up for re-election, on the chamber floor. "They don't understand who we are. They don't understand we live in communities and that we support and protect each other. Instead, they write one regulation that's supposed to be one-size-fits-all."
Many of the measure's Democratic cosponsors hail from rural states won by Trump. Their support for the long-sought changes may demonstrate to their voters, many who voted for Trump, that they can work with the President and not reflexively oppose anything he supports.
Ahead of Wednesday's vote, Sen. Mark Warner, a Virginia Democrat, defended his support for the bill, arguing he would never back remedies that would put the financial system at risk.
"Let me be clear that I will do nothing and support no legislation that seriously undermines or cuts back on the provisions and the systemic protections that were put in place," Warner said on the chamber floor. "But eight years later ... there is widespread agreement that some of the standards we set in Dodd-Frank needed time for review."
Those cap changes include exempting community banks with $10 billion or less in assets from having to comply with the so-called Volcker Rule, a regulation that bars financial institutions from making risky bets with money insured by taxpayers.
It also stops banks that originate 500 or fewer mortgages each year from having to collect racial data on their loans. Under a 1975 law, financial institutions are required to report the race, ethnicity and ZIP codes of borrowers so regulators can make sure they aren't discriminating in lending.
Some new consumer protections were also added to the bill including offering Americans free credit freezes and barring lenders from declaring a student loan in default when a co-signer dies or declares bankruptcy.
It's not just progressives who've highlighted negative consequences from the changes to the bill. The nonpartisan Congressional Budget Office weighed in with its take on Monday, before the initial vote, and came to the conclusion that the bill, if passed, would increase the chances of another 2008-style collapse.
"CBO's estimate of the bill's budgetary effect is subject to considerable uncertainty, in part because it depends on the probability in any year that a systemically important financial institution (SIFI) will fail or that there will be a financial crisis," the report states, before adding the caveat: "CBO estimates that the probability is small under current law and would be slightly greater under the legislation."
The Senate finally took action on Tuesday. Not to break the immigration impasse, move forward on guns or hammer out a plan to rebuild the nation's decaying infrastructure.
The Senate finally took action on Tuesday. Not to break the immigration impasse, move forward on guns or hammer out a plan to rebuild the nation's decaying infrastructure.
Instead, a bipartisan group of 67 -- 17 of them members of the Democratic caucus -- voted to advance a bill that would roll back and revise regulations imposed on banks by the 2010 Dodd-Frank law.
Democratic supporters of the legislation, almost all of them either up for re-election this fall and/or from red or purple states, insist that its sole purpose is to loose small lenders and community banks from the chains of excessive federal oversight and give a shot of adrenaline to bootstrapping entrepreneurs and business owners.
"Main Street businesses and lenders tell me that they need some regulatory relief if we want jobs in rural America," Sen. Jon Tester, a Montana Democrat who voted for Dodd-Frank (along with seven other Democratic supporters of the new bill), said during a hearing in November of last year. "These folks are not wearing slick suits in downtown New York or Boston. They are farmers, they are small business owners, they are first-time homebuyers."
That, in a nutshell, is the messaging. The reality is rather less idyllic.
The vast majority of the benefits tucked into the bill, which either unravels or dilutes important pieces of the existing law, rewards, if not the very biggest, then extremely large institutions. Among them, a group typically referred to as "midsize banks," are familiar faces like BB&T, SunTrust and the American outposts of foreign giants like Deutsche Bank, BNP Paribas and Banco Santander. The latter trio hold relatively smaller assets in the US, so they too would benefit.
Before getting into the messy politics here, let's review the policy.
The bill has three main planks: 1) Banks with less than $10 billion in assets would be exempted from the Volcker rule, which put the brakes on certain kinds of risky trading in the wake of the 2008 financial crisis; 2) The list of banks deemed "too big to fail," and thus faced with tighter restrictions, would be thinned by raising the threshold from $50 billion in assets to $250 billion; and 3) One size fits all regulations, even for the mega-banks -- the ones, as Tester put it, with employees "wearing slick suits in downtown New York or Boston" -- would be vulnerable to new pressures, with the Federal Reserve now required to work alongside those institutions to customize certain rules.
The last piece could set off a race to the bottom, with the largest players on Wall Street demanding more freedom and, if they're denied, being able to point to the competition as evidence to help make their case. But the bulk of the benefits in the bill go to the so-called medium-sized banks. Here, per CNNMoney's Donna Borak, is what would change for banks with assets up to $250 billion:
"They would no longer have to hold as much capital to cover losses on their balance sheets. They would not be required to have plans in place to be safely dismantled if they failed. And they would have to take the Fed's bank health test only periodically, not once a year."
How dangerous would that be? The nonpartisan Congressional Budget Office weighed in with its take on Monday, before the initial vote, and came to the conclusion that the bill, if passed, would increase the chances of another 2008-style collapse.
"CBO's estimate of the bill's budgetary effect is subject to considerable uncertainty, in part because it depends on the probability in any year that a systemically important financial institution (SIFI) will fail or that there will be a financial crisis," the report says, before adding this considerable caveat (emphasis mine): "CBO estimates that the probability is small under current law and would be slightly greater under the legislation."
Oh, and it would also increase the federal deficit by $671 million.
So, why -- as a matter of policy and politics -- would so many Democrats side with Republicans in supporting this bill?
For that, we turn to some of its most insistent backers, moderates from Trump states facing re-election this fall. Tester is one, along with Sens. Heidi Heitkamp of North Dakota and Joe Donnelly of Indiana. Sens. Claire McCaskill of Missouri and Joe Manchin of West Virginia are also on board. All of them face tough re-election fights. CNN rates all but Tester's contest in Montana as a "tossup."
"This legislation would make it easier for Hoosier families to gain access to mortgages and small businesses to access capital," Donnelly said in a statement, "and it also includes important new consumer protections, such as free credit freezes, in response to the Equifax data breach."
Sen. Tim Kaine of Virginia, who is strongly favored in his coming re-election bid, has also talked about "consolidation of the banking industry in Virginia" as an unintended consequence of Dodd-Frank's current language. If smaller banks are freer to pursue the business they desire, the theory goes, the more likely they are to thrive on their own.
If the policy end of this is, most charitably, complicated, then the political end seems downright impenetrable.
The conventional wisdom going into 2017 was that red state senators might have to stray from the party line every now and again to show off their independence and solidify their standing with the Republican and independent voters who will mostly decide their fates this November. But like so many political assumptions in the Trump era, it was largely disproved. Democrats, most notably in the many fights to preserve Obamacare, stuck together.
With an energized base on their side, and poking at it when they threaten to go wobbly, Democrats are looking at better-than-expected polling and hearing a chorus of canaries singing in GOP coal mines. But with the bank bill, they are showing the limits of that unity -- and offering up some jarring, if fundamentally unsurprising, insight into where their priorities lie.
The loudest criticism of the bank bill in Washington has come from Sen. Elizabeth Warren, a Massachusetts Democrat who is eyeing a White House run in 2020, and has seen the Consumer Financial Protection Bureau she crafted as part of Dodd-Frank undermined by the administration. Democrats might have used their leverage here to backstop the CFPB, but never made it a sticking point.
A frustrated Warren on Tuesday tweeted out the names of the Democrats who voted to advance the bill, and added this: "Senate Republicans voted unanimously for the #BankLobbyistAct. But this bill wouldn't be on the path to becoming law without the support of these Democrats. The Senate just voted to increase the chances your money will be used to bail out big banks again."
The CBO report said as much, so this was hardly a cheap shot. Sen. Bernie Sanders, the Vermont independent who's another vocal critic and 2020 contender, asked in a statement, "Are our memories so short that we have learned nothing from (the 2007-2008 financial) disaster?" This bill, he added, would "lay the groundwork for another massive financial collapse."
Neither Sanders nor Warren impugned their colleagues' motives or political savvy. Maybe they should have. Because the politics here don't make much sense. It's true that Trump was elected, in part, on a platform of economic populism. For all that's happened since, that hasn't changed. The idea, then, that red state voters would turn on a Democrat who voted against a gift to the financial sector simply doesn't compute.
Where in the past this kind of deal might have passed relatively unnoticed, the current state of heightened awareness, especially among liberals, will make that impossible. Hence the leadership's opposition, even if they don't seem to be whipping others to follow. However it plays out, a swift backlash isn't guaranteed, but increased suspicion and cynicism going forward are a good bet.
And for Democrats, in 2018 but especially when it comes time to challenge Trump, that might be the most dangerous thing of all.
Senate Passes Bill Loosening Banking Rules, but
Hurdles Remain in the House
11/14/2018 Senate Passes Bill Loosening Banking Rules, but Hurdles Remain in the House - The New York Times
https://www.nytimes.com/2018/03/14/business/senate-banking-rules.html 2/4
The bill also exempts firms with less than $10 billion in assets from the so-called Volcker Rule,
which prohibits banks from making risky bets with federally guaranteed deposits. Mortgage rules
for small lenders would also be eased, and midsize banks like SunTrust, P.N.C. and Regions would
be substantially relieved of strict regulation.
“This bill is an important step in right-sizing the rules for America’s banks, and it will allow
financial institutions to better serve their customers and communities while maintaining safety
and soundness,” said Rob Nichols, the president of the American Bankers Association.
Big banks such as Citigroup and JPMorgan Chase aggressively lobbied to tuck in provisions that
would be beneficial to Wall Street, but there has been little bipartisan appetite to change the
regulatory infrastructure that governs the largest financial institutions in the country.
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 unaccou
11/14/2018 Senate Passes Bill Loosening Banking Rules, but Hurdles Remain in the House - The New York Times
https://www.nytimes.com/2018/03/14/business/senate-banking-rules.html 3/4
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, New Banking Mob?)referring to Senator Mike Crapo, 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 Wednesday.
Ms. Warren pointed to a Congressional Budget Office report this month that analyzed the bill and
concluded that it could increase the likelihood of failure for a bank or credit union.
The measure has put Senator Chuck Schumer of New York, the Democratic leader who voted
against it, in the difficult position of mediating the split in his party after more than a year of
holding a united front against Mr. Trump. However, before the midterm elections in November, he
has given conservative-state Democrats leeway to vote as they see fit and has urged progressives
in the party to tread lightly when criticizing moderates.
But the dissension in the party has spilled into public view.
In an interview with The Atlantic this week, Ms. Heitkamp shot back at Ms. Warren. “I think
people in North Dakota don’t care what Elizabeth Warren thinks,” Ms. Heitkamp said.
With the passage of the bill, the onus will now be on House Republicans to decide whether 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.
Last year, the House Republicans passed the Choice Act, which would have gutted Dodd-Frank, in
a party-line vote. But the bill was considered dead on arrival in the Senate.
Pressure to send something to the president’s desk will be great, as the White House expressed
support for the Senate bill and urged Congress to forge ahead in hopes of scoring another
legislative achievement after last year’s $1.5 trillion tax cut. Although Mr. Trump promised to do a
“big number” and dismantle Dodd-Frank, the relatively modest bill that cleared the Senate on
Wednesday may have to suffice.
11/14/2018 Senate Passes Bill Loosening Banking Rules, but Hurdles Remain in the House - The New York Times
https://www.nytimes.com/2018/03/14/business/senate-banking-rules.html 4/4
“The president looks forward to discussing any further revisions the House is interested in
making, with the goal of bipartisan, pro-growth Dodd-Frank relief reaching his desk as soon as
possible,” the White House said in a statement on Wednesday.
A version of this article appears in print on March 14, 2018, on Page A18 of the New York edition with the headline: Senate Passes a Bill
Loosening Banking Rules, but Hurdles Remain in the House
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 but expressed hope that the legislation could herald a return to the kind of cooperation that has recently eluded Congress.
“This legislative package is an example of what we can achieve by working together and shows Democrats and Republicans can break the gridlock,” said Senator Joe Donnelly, Democrat of Indiana.
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.
The bill also exempts firms with less than $10 billion in assets from the so-called Volcker Rule, which prohibits banks from making risky bets with federally guaranteed deposits. Mortgage rules for small lenders would also be eased, and midsize banks like SunTrust, P.N.C. and Regions would be substantially relieved of strict regulation.
“This bill is an important step in right-sizing the rules for America’s banks, and it will allow financial institutions to better serve their customers and communities while maintaining safety and soundness,” said Rob Nichols, the president of the American Bankers Association.
Big banks such as Citigroup and JPMorgan Chase aggressively lobbied to tuck in provisions that would be beneficial to Wall Street, but there has been little bipartisan appetite to change the regulatory infrastructure that governs the largest financial institutions in the country.
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.
Senator Heidi Heitkamp of North Dakota was among the Democrats who voted in favor of a bipartisan bill that would ease some financial rules.J. Scott Applewhite/Associated Press
Representative Jeb Hensarling, Republican of Texas and the 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, 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 Wednesday.
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Ms. Warren pointed to a Congressional Budget Office report this month that analyzed the bill and concluded that it could increase the likelihood of failure for a bank or credit union.
The measure has put Senator Chuck Schumer of New York, the Democratic leader who voted against it, in the difficult position of mediating the split in his party after more than a year of holding a united front against Mr. Trump. However, before the midterm elections in November, he has given conservative-state Democrats leeway to vote as they see fit and has urged progressives in the party to tread lightly when criticizing moderates.
But the dissension in the party has spilled into public view.
In an interview with The Atlantic this week, Ms. Heitkamp shot back at Ms. Warren. “I think people in North Dakota don’t care what Elizabeth Warren thinks,” Ms. Heitkamp said.
With the passage of the bill, the onus will now be on House Republicans to decide whether 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. Last year, the House Republicans passed the Choice
Act, which would have gutted Dodd-Frank, in a party-line vote. But the bill was considered dead on arrival in the Senate.
Pressure to send something to the president’s desk will be great, as the White House expressed support for the Senate bill and urged Congress to forge ahead in hopes of scoring another legislative achievement after last year’s $1.5 trillion tax cut. Although Mr. Trump promised to do a “big number” and dismantle Dodd-Frank, the relatively modest bill that cleared the Senate on Wednesday may have to suffice.
“The president looks forward to discussing any further revisions the House is interested in making, with the goal of bipartisan, pro-growth Dodd-Frank relief reaching his desk as soon as possible,” the White House said in a statement on Wednesday.
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