Money in the banks
For causes that unite members of Congress across party lines, there’s nothing like doing the bidding of their contributors.
Take the House’s bipartisan vote Tuesday to weaken Dodd-Frank, the banking and consumer reform legislation passed in the wake of the 2008 financial collapse and recession. Not quite eight years after the reform became law, 33 Democrats joined all but one Republican in this act of collective amnesia, induced in no small part by the generous political fundraising and avid lobbying of the financial sector. Passed by the Senate with bipartisan support in March, the bill is expected to be signed by President Trump, whose administration has been busily doing what the big banks want on multiple fronts despite his populist pretensions.
The legislation dramatically shrinks the number of institutions deemed important to the financial system and therefore subject to strict oversight designed to avoid a repeat of the panic a decade ago. It raises the threshold automatically triggering such measures from $50 billion to $250 billion in assets, which could loosen requirements for institutions as large as American Express, BB&T and SunTrust, leaving a dozen or fewer under the most stringent regulations. Small banks, defined as under $10 billion in assets, would also be exempt from the Volcker Rule,
which prohibits certain risky investments of customers’ money. And an estimated 85 percent of banks would also be excused from reporting requirements meant to detect discrimination in home mortgage lending.
Supporters of the regulatory retreat would have the public believe that Dodd-Frank constitutes a crushing burden on a struggling financial industry, particularly everyone’s favorite friendly neighborhood banker. Meanwhile, on the very day that the House approved the rollback, the Federal Deposit Insurance Corp. reported that the commercial banks and savings institutions it covers made $56 billion in the first quarter of the year, a 27.5 percent increase from a year earlier. Those neighborhood banks are doing well, too, having seen a 17.7 percent surge in profits.
Congress’ more likely motivation is another figure: the $1.1 billion in contributions to federal campaigns attributed to financial institutions in the last two-year election cycle, according to the Center for Responsive Politics, more than any other sector spent. That haul favored Republicans only modestly, with 46 percent going to Democrats. Judging by this week’s vote, it was money well spent.