The United States Senate is set to vote Tuesday to destroy America’s (and maybe, the global) economy. Yes, it is a Republican plot, just another supplication before one of their masters (billionaires, corporations, big banks, Russia) as they seek to capitalize on their majority power and to raise campaign funds for November.
Sure, the destruction of the global economy might seem like hyperbole, but if Republicans in Congress can play on people’s emotions and exaggerate, we should be able to as well, right? Except, we are not exaggerating. Republicans seek to effectively cripple the Dodd-Frank Wall Street financial reforms instituted in 2010 after the 2008 financial crisis rocked the world. Without those protections, banks can and will return to the their old, risky ways. And then it’s not a question of if the economy will crash, but when.
A rare bipartisan effort would benefit banks, endanger everyone else
Under Dodd-Frank, financial institutions with more than $50 billion in assets are considered “systemically important financial institutions” (SIFI’s). That does not mean they are “too big to fail,” just that they are too big for the Fed to let them fail if it can be prevented.
These SIFIs have been required by Dodd-Frank to keep more cash on hand, known in the industry as adjusting their “supplementary leverage ratio” (SLR). They are also required to submit to biannual “stress tests” like someone with a cardiac condition might, to gauge how well they respond. The current legislative efforts would raise that threshold to $250 billion. The argument from Republicans is that the threshold is too low, and is harming small community banks. They may be partially correct, but they are still being deliberately misleading.
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I spent a few years recently living in a tiny Maine town, just a few thousand people. The bank in town was modest on the outside but glorious on the inside, dating to the town’s glory days early in the 20th century. The floors were inlaid marble. The massive vault door, covered only by a grate during business hours, gleamed and reflected the lights from the ornate chandeliers. The teller was my neighbor. THIS is the sort of small community bank Republicans want you to think they are rescuing from crushing regulations.
But like the plain exterior, the idea of the old-fashioned small community bank was just a facade. The branch was a subsidiary of a diversified financial services company with assets of $44 billion. Rather than benefiting community banks, the revised statutes benefit what writer David Dayen nicknamed “stadium banks”, for their frequent pursuit of naming rights on sporting venues. Worse, the Congressional Research Service already studied Dodd-Frank and the impact on small banks, finding the rules already tailored to exempt or protect them. That full report can be found here.
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The pending legislation would also cripple efforts to combat housing discrimination by removing the requirement banks report the credit scores of mortgage applicants they approve or deny. It would ease restrictions on foreign banks operating in the United States. Think Progress first reported the current efforts beng considered in November 2017, but really, the efforts at repeal (or at least, weakening) began before the original legislation was even approved.
are vulnerable Democrats willing to sacrifice dodd-frank?
Such selling-out by Republicans has become the norm. But in this case, Democratic Senators desperate to show a spirit of bipartisanship to constituents in their battleground states, have joined forces with them. Democratic Senators Joe Donnelly, (IN), Heidi Heitkamp, (ND), Jon Tester, (MT), Mark Warner, (VA), Claire McCaskill, (MO), Joe Manchin, (WV), Tim Kaine, (VA), Gary Peters, (MI), Michael Bennet, (CO), Chris Coons, (DE), Tom Carper, (DE), and Doug Jones, (AL) are co-sponsors, as is Independent Angus King, (ME), who caucuses with Democrats. All but Warner, Bennett, Coons, Peters, and Jones are up for re-election in 2018. Of those five, only Bennett and Jones are from states without a Senatorial election this year.
Other potential “Yes” votes are Amy Klobuchar (MN), and Bill Nelson (FL), both also facing re-election this fall. Worse, the Republicans only really need the votes to break an expected filibuster by Elizabeth Warren. So these Democrats could side with Republicans to bring the bill to a floor vote, thus avoiding the Twitter wrath of President Trump, and then vote against it to appease progressives.
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The quote of the day is from Senator Mike Crapo, (R-ID), the chairman of the Senate Committee on Banking, Housing and Urban Affairs and primary sponsor of the legislation.
“It’s going to free up a phenomenal amount of capital in this country that right now for no good reason, no safety or soundness reason, is being held back.”
Remember those words. “No good reason.” “No safety or soundness.” When the Republicans (aided and abetted by Democrats) bring the global economy to its knees again, at least we can repeat them back and say, “We told you so!”
Featured image photo by Chip Somodevilla/Getty Images.
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