Liberal activists attacking Colo. Dem for backing bill
Sen. Bennet one of more than dozen in party who joined GOP majority
WASHINGTON» A bill that would weaken oversight of the banking industry is up for debate this week in the U.S. Senate, where Colorado Democrat Michael Bennet’s support of the measure is drawing heat from its liberal opponents who warn the proposal could lead to a repeat of the 2008 financial crisis.
Bennet was one of more than a dozen Democrats who joined with the Republican majority on Tuesday to help the measure clear a procedural hurdle and set up a final vote in the coming days.
Its advance drew fire from Democrats such as U.S. Sen. Elizabeth Warren, D-Mass., who said the legislation was “all about helping big banks.”
“Instead of learning from the lessons of the 2008 crash, Congress is getting ready to pass the biggest financial deregulation bill in decades,” she said.
At its most basic, the measure would ease regulations on smaller banks and roll back some of the oversight rules put in place after the Great Recession — notably the way the country’s biggest banks are monitored by the Federal Reserve.
Under current law, banks with more than
$50 billion in assets are required to adhere to special rules, including undergoing stress tests and keeping enough money on hand to absorb a bad loss. The idea is to prevent a “too big to fail” financial institution from dragging down the rest of the U.S. economy.
The new measure would raise the bar from $50 billion to $250 billion, thereby exempting 25 of the 38 largest banks in the U.S. from additional oversight, according to the Center for American Progress, a leftleaning think tank in Washington.
The change “would result in fewer assets being subject to enhanced prudential regulation and would thus increase the likelihood that a large financial firm with assets of between $100 billion and $250 billion would fail,” wrote analysts with the nonpartisan Congressional Budget Office.
Bennet and other supporters of the Senate bill have argued that the measure would keep in place adequate safeguards for the U.S. economy while freeing small banks from onerous regulations.
For example, the legislation would leave intact the Consumer Financial Protection Bureau, a longtime target of Republicans that was created in the wake of 2008 financial crisis.
“There’s been a lot of misinformation about what this legislation does and doesn’t do,” Bennet said in a statement. “In reality, it maintains these core protections but also provides narrow relief for Colorado’s small financial institutions so they can extend credit to consumers, small businesses and our rural communities.”
A number of provisions in the bill are targeted at banks with less than $10 billion in assets. One provision would alter the leverage ratio of capital to assets for community banks.
“Thus, institutions could hold assets with a greater risk profile than they do now without having to hold any additional capital,” the CBO analysts noted.
Don Childears, the president and CEO of the Colorado Bankers Association, said the method in which the measure adjusts regulations would make it easier for community banks to make loans to customers who have struggled to get them in the past, including the newly employed and the recently retired.
The bill gives these banks the “flexibility to accommodate a lot of customers they can’t now,” Childears said.
It also could provide a lifeline to smaller banks and the communities they serve, said supporters.
In the aftermath of the 2008 financial crisis and Congress’ response to it, the “number of independent commercial banks shrank by 14 percent — more than 800 institutions,” according to the Federal Reserve Bank of Richmond.
While the proposal before the Senate is broadly backed by bankers and investors, it’s less popular among liberal Colorado activists who have spent much of the past year targeting Republican U.S. Sen. Cory Gardner, Bennet’s Colorado counterpart, on other issues.
On Monday, the group Indivisible Front Range Resistance asked its members in a Twitter post to swamp Bennet’s office with calls to protest his support.
“Fill up the phone lines to @SenBennetCO: whom do you stand with — big banks or families and workers?” wrote the group’s leaders.
One criticism is the amount of campaign cash that Bennet has taken from the financial industry.
According to the Center for Responsive Politics, a nonpartisan election watchdog, the industry that has contributed the most to Bennet’s political career is the securities and investment sector — to the tune of more than $3.3 million.
Sarah Nelson, 44, who helps lead an Indivisible Front Range Resistance group based in Jefferson County, questioned the need for the bill given the recent run of success for U.S. banks, which posted record profits in 2016.
“Why is (Bennet) looking out for a banking sector that’s highly profitable?” Nelson said.
She said the last financial crisis has had a lasting impact on her family.
“We experienced job losses, and we still have creditcard debt to this day that relate to that period of our life,” she said. “Another recession is going to widen the already-large inequality gap.”