Senate considers deregulation of banks

Republican, Democrat senators look to rewrite Elizabeth Warren's history

Republican, Democrat senators look to rewrite Elizabeth Warren's history

Progressives, some Democrats and consumer advocates are sounding the alarm and raising concerns about whether it might heighten the risk of another financial crisis by weakening the rules that some banks would need to adhere to. They probably have outrage fatigue to thank for not getting greater pushback from their constituents, but it is still worth taking a look at some of the data points Democratic senators are using to justify their votes.

A Senate effort to relax certain banking regulations has cleared an early procedural hurdle with enough support from Democrats to show the bill has a good chance of passage.

The bill has been the rare piece of legislation to have some Democrats crossing the aisle in support, with 17 members of the party joining their GOP colleagues in voting affirmatively.

Crapo's bill would ease the capital and operational burden on smaller lenders, but also includes a number of provisions beneficial to all but the largest US banks.

"This bipartisan legislation is a common-sense approach that maintains regulatory authority but makes reasonable changes that allow traditional lenders to better meet the credit needs of the people and businesses in our rural and urban markets", said the letter to Banking Committee Chairman Mike Crapo, R-Idaho, and Sen.

Several senior Democratic senators, including Warren and Sherrod Brown, have come out against it.

However, analysts say that smaller banks - who may have been reluctant to expand out of fear of regulatory costs - could be encouraged to get bigger through mergers and acquisitions if the bill were passed.

Backers of the plan argue that smaller banks shouldn't have to face the same set of strict rules as behemoth Wall Street banks that could endanger the entire financial system if they go under.

Cutting It Close                     Source Federal Reserve 2017 Comprehensive Capital Analysis and Review            
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Cutting It Close Source Federal Reserve 2017 Comprehensive Capital Analysis and Review .cha

"The question I would pose is: 'Why are we doing this?' With bank profits at or near all-time highs, lending rebounding since the crisis, I'm not sure what problem the bill is trying to solve", said Gregg Gelzinis, research assistant for economic policy at the Center for American Progress, a left-leaning think tank.

In a pen-and-pad with reporters on Tuesday, four moderate Democrats - Heitkamp, Tester, Donnelly and Warner - tried to dispel mischaracterizations of the bill. The language in the bill now says "the Fed shall tailor the rules for the biggest banks", instead of may.

The rollback measure also has the support of Sen.

The banking industry cheered the legislation's progress on Tuesday. "I'm going to keep pushing for it".

The bill is the culmination of years of work to change Dodd-Frank.

The bill raises the threshold of what is considered a big bank in terms of it being critical to the financial system from $50 billion to $250 billion. That means more than two dozen banks would be shielded from some of the Federal Reserve's oversight.

Warren, whose brainchild is the Consumer Financial Protections Bureau (CFPB), is one of the most ardent supporters of the 2010 law, believing it is a crucial safeguard against malpractice on the part of large banks. Drafting the letter were Ally Financial, American Express, Bank of the West, BBVA Compass, BMO Financial Corp., Citizens Bank, Comerica Bank, Fifth Third Bancorp, Huntington Bancshares, KeyCorp, M&T Bank Corp., Regions Bank and SunTrust Banks Inc.

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