The Atlanta Journal-Constitution
Senate moves closer to passing bill to ease bank safeguards
The Senate moved closer Tuesday to passing legislation to roll back some of the safeguards Congress put in place to prevent a repeat of the financial crisis. Enough Democrats supported a procedural vote on the bipartisan bill to show it has a good chance of passage in the Republican-majority Senate.
The move to alter some key aspects of the Dodd-Frank law comes ten years after the financial crisis rocked the nation’s economy. The bill has overwhelming Republican support and enough Democratic backing that it’s expected to gain the 60 votes necessary to clear the Senate. That was reflected in the 67-32 vote Tuesday, with 16 Democrats and one independent voting to move ahead with consideration of the bill.
Several Democratic lawmakers facing tough re-election races this year have broken ranks with Minority Leader Chuck Schumer, D-N.Y. and Sen. Elizabeth Warren, D-Mass.
Nonpartisan congressional analysts say the legislation would slightly increase the probability of a big bank failure — prompting a possible taxpayer bailout — or another financial meltdown. The probability of those events is deemed to be small under current law. The new assessment by the Congressional Budget Office estimates the bill would increase federal deficits by $671 million between 2018 and 2027 if it became law.
“This bank giveaway bill will cost taxpayers,” Sen. Sherrod Brown of Ohio, the top Democrat on the Senate Banking Committee, said in a statement. “Hardworking Americans shouldn’t have to pay for favors to Wall Street, foreign megabanks and their lobbyists.”
Speaking on the Senate floor Tuesday, Brown warned that the easing of stress-testing and inspection requirements for larger banks under the bill would jeopardize “the safety and soundness of the banking system.”
But the bill’s proponents insist it would bring a needed boost to beleaguered banks outside Wall Street that didn’t engage in the reckless practices that fueled the financial crisis.
“This bill recognizes a simple truth: Small community banks and Main Street credit unions are not the same as multitrillion-dollar banks on Wall Street,” Senate Majority Leader Mitch McConnell said on the Senate floor before the vote. Under Dodd-Frank, he said, “Small-scale lenders have been subjected to a litany of new regulatory, compliance and (inspection) demands that were designed with the country’s largest banks in mind. Dodd-Frank’s enormous regulatory burden has been inefficient and unhelpful for financial institutions of all sizes, but it has hit Main Street lenders especially hard.”
The legislation would increase the threshold at which banks are subject to stricter capital and planning requirements. Lawmakers are intent on easing those rules for midsize and large regional banks, asserting that would boost lending and the economy.
Banks have long complained about the cost of complying with the many requirements of Dodd-Frank. Under the Senate bill, some of the nation’s biggest banks would no longer have to undergo an annual stress test conducted by the Federal Reserve. The test assesses whether a bank has enough capital to survive an economic shock and continue lending. Dozens of banks would also be exempted from making plans called “living wills” that spell out how the bank will sell off assets or be liquidated in a way that won’t create chaos in the financial system.
The House version of the bill is a “recalibration” of Dodd-Frank to help community banks and credit unions increase their capitalization, the Financial Services Committee chairman said Tuesday.