Thanks to 12 Democratic co-sponsors, a Republican bill set to take some of the bite out of the Dodd-Frank Act will have the filibuster-proof majority it needs to pass the Senate.
The Economic Growth, Regulatory Relief, and Consumer Protection Act will broaden certain loopholes and remove some of Dodd-Frank's regulations.
The legislation exempts banks with less than $10 billion in assets from the Volcker Rule (which bars commercial banks from some speculative trades) and various mortgage requirements; allows banks with between $50 billion and $250 billion in assets to operate with less regulatory scrutiny; and directs the Federal Reserve to tailor regulations to the specific balance sheets of the bigger banks, rather than enforcing rules equally across the board.
Some Democrats previously have showed support for changing some of Dodd-Frank's provisions, including one of the bill's original sponsors:
“I would vote against this bill,” says former Rep. Barney Frank, a Democrat who helped spearhead the namesake Dodd-Frank Act. “But I understand the pressure to vote for it, and I don’t think the bill makes a serious dent in what we did.”
Behind this legislation lies the view that Dodd-Frank is an onerous hassle for community and regional banks, neither of which were major players in the financial crisis. Some Democrats, including Frank, have long been willing to amend these portions of the original bill. Frank previously supported raising the threshold for tighter regulation from $50 billion to $100 billion and giving more leeway to local banks, for instance.
Frank also says it has nothing to do with the major players in the 2008 financial crisis -- such as Goldman Sachs -- but the smaller regional and community banks that have suffered alongside them.
“The politics here are driven by banks with $10 billion in assets and under,” says Frank. “They’re in everyone’s district. It’s not campaign contributions that drive this. It’s that everyone has four or five or 12 community banks. They’re everyone’s friends.”
So Republicans and at least 12 Democrats are on board with the throwing a bone to smaller banks, but what else does the new legislation change?
- Whereas Dodd-Frank said the Federal Reserve "may" tailor regulations to the specific circumstances of bigger banks, if it sees the need, the new bill says it "shall" tailor regulations -- meaning all banks will no longer be regulated in the same manner.
- The bill creates a loophole for foreign megabanks, like Deutsche Bank and Credit Suisse, to dodge regulation by "sheltering their US holdings in vehicles that keep them under the $250 billion mark." An amendment offered by Sen. Sherrod Brown (D-OH) to close the loophole was shot down in a party-line vote.
- An additional change raises the limit on the number of mortgages a bank must hand out before having to report the terms of the loans and who received them, from 50 to 500. As Vox notes, this will make it more difficult to keep an eye on racially discriminatory lending practices.
The Democrats supporting these measures are as follows:
(Clicking on each name will take you to the senator's contact info.)