Bipartisan banks
Pressing issues go ignored while Congress rushes to help its financiers.
Quicker and slicker than a James Harden-led fast break, lawmakers last week showed they can really attack the basket when their hearts and their campaign benefactors’ special interests meld into a happy confluence. Not to implement comprehensive immigration reform, of course. Or craft the much simpler fix for the dilemma the so-called Dreamers face. Or to find consensus on keeping guns out of the wrong hands while protecting 2nd Amendment rights. On those issues, despite overwhelming public support for sensible measures, Congress more closely resembles the mighty Memphis Grizzlies (18 and 46 at this writing).
No, lawmakers donned the Rockets’ red glare of purpose and certitude last week when they attacked what they must consider the most urgent issue facing the nation: gutting the 2010 financial reform measure known as Dodd-Frank. The new bill inspired a bipartisan sense of purpose: Seventeen Democrats, most of them up for reelection in states that went for Donald Trump in 2016, joined every Republican in support.
Why? The ostensible reason, according to the Democrats who back the bill, is to relax onerous crisis-prevention controls on medium-sized banks, community banks and credit unions, while maintaining vigilance over the huge banks that drove the economy into the Great Recession ditch a few years ago.
That seems reasonable; every regulatory scheme needs periodic calibration and adjustment. The problem, though, is that the bill the Senate seems likely to approve, the so-called Crapo bill — for U.S. Sen. Mike Crapo, R-Idaho, chairman of the Senate Banking Committee — doesn’t help the smaller institutions so much as it liberates the big banks that got this country in trouble in the first place. Under the new bill, the level of assets at which banks are considered potentially risky and subject to crisis-prevention rules would grow from $50 billion to $250 billion. That means that 26 of the 38 largest banks in the country won’t be subject to crisis prevention controls. They would be free to revert to the risky wheeling and dealing of years past.
The Senate bill also weakens mortgage-lending protections, as well as safeguards against racial discrimination in housing. A recent Congressional Budget Office report warned that it would increase the possibility of government having to bail out big banks at some point.
At times like these, we can only point to what then-Chronicle business columnist Loren Steffy wrote in the wake of the financial crisis: “We know that left to their own devices, big banks are willing to destroy themselves and the economy in the name of short-term profits. The question isn't whether the regulations have gone too far, but whether they've gone far enough.”
About the only thing good we can say about the Crapo bill is that it’s better than the more extreme version being debated in the House. Both versions, though, could threaten job and wage gains and worsen income and wealth inequality. Both reduce consumer protections.
With the economy percolating along nicely, perhaps we won’t need potent Dodd-Frank protections anytime soon. Until we do. And by then, if a fastbreaking Congress scores in the next few weeks, we will have fired all the refs.