At a time when Democrats at the grassroots level are more fired up and ready to go then they’ve been in years – spoiling for a fight with President Donald Trump and his cronies in the GOP – a group of Senate Democrats is joining with Republicans to, if you’ll believe it, deregulate banks.
Yes, instead of taking action on, say, gun control, the Senate this week will likely approve a rollback of the regulations adopted in response to the 2008 financial crisis. About a dozen Democrats are backing the effort, along with nearly every Republican, and the GOP is fishing for even more votes from the blue side of the aisle in the hopes of turning a win into a rout.
Let’s be clear: It’s no surprise that a government wholly controlled by the GOP wants to reduce bank regulations. But that Democrats are lending them a helping hand is terrible policy and awful politics.
Democrats supporting this thing are making the case that it’s for the benefit of small, community banks, which are politically sympathetic and generally not the cause of global financial panics. Don’t buy it. While there are some bits of the bill that would reduce reporting requirements for small banks, it also includes big benefits for large financial institutions.
For instance, the bill would increase the amount of assets a bank needs to have in order to qualify for enhanced regulation from the Federal Reserve from $50 billion to $250 billion. This one move would exempt 25 of the nation’s 38 biggest banks from stronger supervision. The bill also includes an exemption from capital standards – essentially the amount of money that banks need to have on hand in case things go south – that benefits some big financial firms, and even more are lobbying to be included.
That’s just the tip of the iceberg when it comes to the damage this bill would inflict. Read this piece by David Dayen at The Intercept for all the hoary details.
In addition to being very dangerous policy, this is very lousy politics. As senators like Bernie Sanders, I-Vt., and Elizabeth Warren, D-Mass., have shown, the energy and vitality when it comes to the Democratic base is in preventing financial shenanigans, not encouraging them. Polls bear that sentiment out. There’s a reason no one who is considered a top tier 2020 Democratic candidate wants to touch this bank bill with a 100-foot pole.
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So what’s the deal with the Democrats who have signed on? Some, such as Delaware Sens. Chris Coons and Thomas Carper, are from bank-friendly states, and have local political reasons, I suppose, for doing what they’re doing. But most of the rest are simply from places President Donald Trump won in 2016, and seem to be operating under the assumption that they need to display bipartisan bonhomie on something in order to survive their next re-election campaign.
Color me skeptical, though, that voters in Montana, North Dakota or Missouri will be more likely to support Sens. Jon Tester, Heidi Heitkamp or Claire McCaskill because they backed a bank deregulation bill. These are the kinds of places where Sanders ran very well against 2016 Democratic nominee Hillary Clinton, so it’s not like Democrats there are clamoring for a pro-corporate candidate who sings Kumbaya with the GOP.
In fact, they’re the sort of places where a real populist candidate might do better than the standard-issue, centrist-approved Democrat over whom Washington consultants fawn, if given the chance.
Perhaps a simpler explanation, then, is that backing the bill is just about money. The senators in question have seen a boom in financial industry donations, and while I generally tend to dismiss the popular view of campaign contributions as an explicit quid pro quo for legislative favors, this one sure stinks more than most.
Meanwhile, there are Democratic senators from purple states such as Virginia’s Tim Kaine and Mark Warner or Colorado’s Michael Bennet for whom backing this bill is simply inexcusable, whatever pablum about community lenders they spew.
For Republicans, deregulating banks is standard operating procedure for which they generally don’t pay a political price. It should be a different story on the left. If you live in a state where a Senate Democrat thinks that the world needs fewer rules for big banks, perhaps take a long, hard look at a primary challenger?
Again, proponents will say that the legislation we’re discussing here is about freeing community banks from the shackles of government regulation so they can make more loans to Main Street. But a bank with more than $200 billion in assets is not straight out of “It’s a Wonderful Life.” To reduce the ability for regulators to keep a handle on them is unacceptable, and sets the country on the road to a 2008 redux.
Ten years ago, we learned what happens when the threads of the regulatory system are pulled out a bit at a time. No one should want to relive those dark days. But too many Democrats seem to have memories that are far too short.