Gun control? Sorry, the Senate is much too busy to tackle that — the top priority has to be letting banks bankrupt themselves.
On Trump’s orders, the Treasury Department issued a report analyzing the law Congress passed after the Great Recession to ensure it didn’t happen again. That law, called Dodd-Frank after the authors, has been an ongoing target of Republicans. Trump famously said right after being elected he would “do a big number” on the law, and for a long time it wasn’t clear what he meant. Now it’s coming into focus.
Dodd-Frank created the Consumer Financial Protection Bureau and gave the federal government new regulatory authority over big banks, including the power to take over failing banks for controlled demolition instead of simply letting them topple over like dominoes onto everybody else. Trump has already defanged the CFPB, so now it’s time for Phase 2: scaling back bank regulations.
A whole bunch of Crapo
That’s what Republicans are going to replace Dodd-Frank with. (I just felt we should similarly name the bill after its author, banking committee chair Mike Crapo.)
Here’s what is in it. One key provision is narrowing the regulation’s targets. It would let most bigger banks escape additional oversight added after the recession. Currently, any bank with more than $50 billion in assets gets extra scrutiny. That covers all the big players, more than 40 banks.
The Crapo bill would bump that threshold up to banks with more than $250 billion — which releases all but the dozen largest banks in the U.S. Republicans say it would give breathing room to “community banks,” but it’s great news for BB&T, SunTrust, American Express, and lots of other household names. (Including one of Trump’s favorites, Deutsche Bank.)
For comparison’s sake to the recession economy, Bear Stearns had about $350 billion in assets in 2008 and Lehman Brothers had $680 billion. But Countrywide Financial — a name you might remember from the mortgage crisis — “only” had about $212 billion in assets. It’s really a question of how risky banks are, not a question of absolute size.
This bill would allow a lot more risk-taking, including softening mortgage rules and capital requirements. Much smaller banks which come closer to the actual idea of “community” banks, with less than $10 billion in assets, would be exempt from even more regulatory requirements.
A few consumer benefits
The bill has just enough support from rural Democrats desperate to get reelected that it could eke through a vote. It’s likely to pass. Looking on the bright side, then, we do get a little out of it besides needlessly jeopardizing the economy.
Two examples: Some medical debts will disappear from veterans’ credit reports, and credit bureaus have to allow at least one free credit freeze per year to all consumers. That’ll come in handy, since the federal government is otherwise deregulating the bureaus through the CFPB and has shown no interest in halting the exponentially growing risk of identity theft.
The bill is also not as bad, relatively speaking, as what the House passed last summer, the so-called Financial CHOICE Act. That would come much closer to the Republican vision of “repeal and replace” for Dodd-Frank, and the Senate isn’t likely to accept anything on that scale.
Fortunately, some Trump appointees see the value in parts of the existing law. Treasury Secretary Steve Mnuchin wants to keep the ability to wind down big banks that are failing, while easing their access to bankruptcy so that would be less often necessary.
Trump’s new Fed chair Jerome Powell is also comfortable with the Senate bill, telling them this week “it gives us the tools that we need to continue to protect financial stability.” He explained that the Fed still has the ability to regulate “smaller” banks on a case-by-case basis.
So we can at least hope the Fed continues to step up, even as Congress and the CFPB repeatedly step back.
Article last modified on July 13, 2018. Published by Debt.com, LLC . Mobile users may also access the AMP Version: Republicans Are Ready to Cut Banking Regulations - AMP.
Article last modified on July 13, 2018. Published by Debt.com, LLC .