Senate prepares to roll back Dodd-Frank banking rules
WASHINGTON» The Senate is preparing to scale back the sweeping banking regulations passed after the 2008 financial crisis, with more than a dozen Democrats ready to give Republicans the votes they need to weaken one of President Barack Obama’s largest legislative achievements.
Congress’ appetite for pulling back bank regulations shows the renewed clout of the financial sector in Washington, not just in the GOP but also among Democrats. Eight years after nearly every Senate Democrat backed a sweeping set of new rules for financial firms large and small, the party is now split, with moderates, several of them facing tough midterm election contests, working with the opposing party.
The core of the new bill exempts about two dozen financial companies with assets between $50 billion and $250 billion from the highest levels of scrutiny by the Federal Reserve, the nation’s central bank. Supporters argue that the legislation would bring much-needed relief to midsize and regional banks that were treated like their much larger counterparts under the 2010 legislation known as Dodd-Frank.
Opponents say it would weaken the oversight needed to stave off the type of dangerous lending and investing that brought the U.S. economy to its knees.
The Senate is slated to take an initial procedural vote this week to move the measure forward. And if it eventually becomes law, it would be the most substantial weakening of DoddFrank since it was passed.
“On the 10th anniversary of an enormous financial crash, Congress should not be passing laws to roll back regulations on Wall Street banks,” said Sen. Elizabeth Warren, D-Mass. “The bill permits about 25 of the 40 largest banks in America to escape heightened scrutiny and to be regulated as if they were tiny little community banks that could have no impact on the economy.”
Sen. Jon Tester, D-Mont., a Banking Committee member and one of the new bill’s leading Democratic supporters, said banks in his largely rural state have been going out of business in part because of the regulations imposed by Dodd-Frank.
“The Main Street banks, community banks and credit unions didn’t create the crisis in 2008, and they were getting heavily regulated,” Tester said, contending that “there’s not one thing in this bill that gives Wall Street a break.”
Critics dispute those claims, echoing a Democratic Party schism over financial regulations that pits liberals such as Warren and top Banking Committee Democrat Sherrod Brown, D-Ohio, against moderate-leaning Democrats including Tester and Sens. Heidi Heitkamp, N.D., and Joe Donnelly, Ind.
Many of the moderates face political pressure to establish a centrist voting record, particularly after voting against the GOP tax cuts in December.