Party split over banking bill
WASHINGTON — In the span of two hours on Capitol Hill on Tuesday, the sharp split between liberal and moderate Senate Democrats on a major bank deregulation bill became crystal clear.
First, Sen. Elizabeth Warren (D-Mass.) stood before TV cameras to complain that the legislation, which is focused on helping small and midsize banks, would put “American consumers at greater risk” because it also loosens rules on larger financial institutions.
“Telling a bank that’s a quarter of a trillion dollars [in assets] that it can be regulated like some tiny, little community bank makes no sense at all,” she said, vowing to fight to amend the bill or halt its passage.
A short time later, four moderate Democrats sat down with reporters to explain their decision to cosponsor what they described as sensible revisions to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.
“This a pretty carefully crafted bill ... where Wall Street does not get the benefits, where it really is focused on small and midsize banks, and I think it’s the right direction to move at this moment in time,” said Sen. John Tester (D-Mont.).
Then they and their colleagues hustled to the Senate floor to cast a key procedural vote on the legislation, which, if enacted, would be the most significant rollback of bank regulations since the 2008 financial crisis.
The bill advanced 67 to 32, clearing the way for the Senate to vote on it this week or next.
All Republicans supported the bill. They were joined by 16 Democrats and one independent, Angus King of Maine, who usually votes with Democrats.
The rest of the Democratic caucus, including California Sens. Dianne Feinstein and Kamala Harris, voted against moving the bill forward.
“I’m not for monkeying with Dodd-Frank,” Feinstein said after the vote, recalling how close the financial system came to collapse in 2008. “I think people who weren’t here maybe underestimate how close we came to a real meltdown.”
But nearly a decade after the crisis, some Democrats are ready to revise DoddFrank after years of complaints from bankers.
Most of the new bill’s provisions are designed to ease burdens on small banks, including reducing regulations on new mortgages made by institutions that originate fewer than 500 such loans a year. There’s almost unanimous support for those changes.
The problems come with other provisions of the bill that would reduce the number of financial institutions that automatically face more intense scrutiny in the wake of the 2008 crisis.
The legislation would raise the threshold for socalled systemically important financial institutions, which face mandatory and rigorous annual “stress tests” and other heightened oversight, to $250 billion in assets from the current $50billion level.
That would provide significant relief for large firms such as State Street Corp., Charles Schwab Corp., Suntrust Banks Inc., and American Express Co. The Federal Reserve would retain the ability to apply heightened oversight to those firms, but it no longer would be mandated.
Four Democrats on the Senate Banking Committee — including three up for reelection this year in states won by President Trump in 2016 — worked with Republicans to craft the bill. They said politics had nothing to do with the bipartisan effort, which began several years ago to try to provide relief for smaller banks, particularly in rural areas.
“This election has nothing to do with this,” Tester said. “This has everything to do with access to capital in rural America.”
Trump handily won Montana in the presidential election. He also won big in Indiana and North Dakota, the states of Sens. Joe Donnelly (D-Ind.) and Heidi Heitkamp (D-N.D.), who also helped draft the bill.
But another Democratic senator who worked on the legislation, Mark Warner of Virginia, noted he is not up for reelection and is proud of helping craft Dodd-Frank.
House Republicans are expected to accept the Senate bill if it passes as is, and Trump is likely to sign it.