Senate Prepares To Help 'Small Banks' Just Like Republican Tax Cuts Helped 'Middle Class'
Poor little rich men
You might have thought this would be a really good week for Congress to do something about guns. Which is almost certainly why the Senate is instead getting right to work on gutting the Dodd-Frank banking regulations that were put in place after the 2008 financial meltdown. As everyone knows, even though the big banks all seem to be doing just fine, onerous government regulations are simply making it impossible for hardworking securities traders to run huge investment rackets like in the good old days, so we need to loosen things up for them. What, the One Percent is supposed to be satisfied with merely getting most of the benefits of last year's Tax Cuts for Rich Fuckwads?
Now, there actually do seem to be some unfortunate unintended consequences of Dodd-Frank, as Senator Jon Tester, a Montana Democrat, noted as he explained why he's getting behind the Senate bill, which is sponsored by Idaho Republican Mike Goddamn Crapo. Tester says small banks in Montana and elsewhere have been going out of business because they're finding it hard to meet all the reporting requirements that were primarily designed to ensure banks that were "too big to fail" would have sufficient assets to weather another sudden downturn. Said Tester, "The Main Street banks, community banks and credit unions didn’t create the crisis in 2008, and they were getting heavily regulated." OK, that's great. So this is a bill designed to give relief to smaller banks that weren't the real target of the post-crash legislation? Sounds good, let's do that! But then Tester had to go and stretch the truth a tad bit, adding "there’s not one thing in this bill that gives Wall Street a break.”
Oh Jon. We are disappointed. Go sit in the corner and re-read your Howard Zinn, young man. If there were any truth to that last bit, then Yr Wonkette might even be OK with tweaks to take some regulatory pressure off smaller institutions, which didn't cause the meltdown and would be unlikely to cause another in the future. [Looks like someone forgot about Neilsie Bush and the S&L crisis, DOK. -- the Editrix] But that's not what this bill does, or at least it's not all this bill does. While it does indeed roll back regulations on smaller institutions, both banks and credit unions (yay credit unions), it also makes life much easier for far bigger banks, too. Tell us more, Elizabeth Warren!
“On the 10th anniversary of an enormous financial crash, Congress should not be passing laws to roll back regulations on Wall Street banks,” Sen. Elizabeth Warren (D-Mass.) said in an interview. “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.”
Specifically, the new guidelines would exempt a couple of dozen very big banks from the closest possible scrutiny from the Federal Reserve: institutions with assets between $50 billion and $250 billion -- not the biggest, sure, but big enough to make a mess if they collapsed. That would only leave the very biggest US banks -- fewer than 10 of them have assets over $250 billion -- subject to close examination from the Fed, with all the "stress tests" and mandatory plans to wind down operations that Dodd-Frank requires of banks. And a number of banks subjected to those examinations have already been found to have been taking supposedly prohibited risks with investors' money. But congratulations, Wall Street -- while this isn't a wholesale repeal of Dodd-Frank like a lot of Republicans want, it's also about to create a new category of institutions that are just big enough to fail.
The banking "reform" is likely to pass the Senate because about a dozen Democrats -- several from red states and up for reelection this year -- are willing to support the thing, and since they already voted against the tax cuts for rich fuckwads, they want to be able to point to a pro-business vote this fall. Some of them are, like Tester, North Dakota's Heidi Heitkamp, and Indiana's Joe Donnelly, among the top recipients of campaign cash from the banking industry, although of course they say there's no connection between that corporate generosity and their votes to help the small banks plus some very big banks. But they're still tough on the very biggest banks, so half a cheer for that, just kidding.
Opponents of the legislation say it's not just the provisions helping bigger banks that suck here; there's also stuff that will actively harm consumers, like elimination of the right of homeowners to sue to prevent wrongful foreclosures. Can't get in the way of profits, after all. Ohio Democrat Sherrod Brown is as pissed about this as Warren is:
The public is not asking for bank deregulation [...] This is not a community bank bill. They say it is. It’s like the tax cuts weren’t a middle-class tax bill; they want to say it is. This is a bill that helps some of the largest banks.
On the other hand, Barney Frank, the former congressman from Massachussetts whose name is on the bill, told the Washington Post that he can live with the bill. He said he didn't see any likelihood of a new crash resulting from changing the regulations on which institutions get close scrutiny, because the Senate bill preserves reforms on mortgages and derivatives designed to prevent the speculation that drove the 2008 crash. He also said the thing is worth passing if it helps Democrats from red states hold onto their seats:
“If they were defeated, in the next Congress you’d get a much worse bill,” Frank said. “The community banks drive this. They’re in everyone’s district.”
So here we are hoping Barney Frank is right and that this thing won't lead to the wild speculation that crashed the economy a decade ago. We seem to remember being told that repealing Glass-Steagall in the 1990s wouldn't lead to any unnecessary risk, and hoo boy, did that ever turn out to be wrong. Ah, but we're probably overthinking this. If you can't trust financial professionals to be careful with the economy, who can you trust, after all?
Yeah, when you're old enough to remember when 10%+ yield was the norm, it seems hardly worth the time it takes to walk your money to the bank any more.
It's not even paperwork any more, it's a stroke on a keyboard.