WASHINGTON ― With support from Senate Democrats, Congress is on track to pass a bill that would enrich banks but slightly raise the odds of a financial crisis like the one that tanked the economy 10 years ago.
"Indiana's own Sen. Joe Donnelly recently helped craft a bill that would provide significant regulatory relief for local credit unions and banks", Kevin Ryan, president and CEO of Financial Center First Credit Union in Indianapolis, wrote in a recent opinion piece praising the legislation. "If we lose the final vote next week, we'll be paving the way for the next big crash", said Sen.
Other co-sponsors come from purple states, like Tim Kaine and Mark Warner of Virginia, Michael Bennet of Colorado, and Gary Peters of MI.
Meanwhile, the Congressional Budget Office released on Monday a score of the bill, stating that enacting it would increase federal deficits by $671 million over the 2018-2027 period; that increase in the deficit represents an increase in direct spending of $233 million and a decrease in revenues of $439 million.
In looking at the legislation's costs, the CBO considered the odds of a systemically important financial institution failing or a broader financial collapse. "Now supporters of the bill want to strip back some of the rules created to stop that from happening all over again", Warren said.
The new bill will exempt financial institutions with assets between $50 billion and $250 billion from scrutiny from the Federal Reserve, and supporters of the legislation said that this would bring relief to companies that were treated like their larger counterparts. Democrats are working through our differences "respectfully", he said.
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The push marks a political turning point for the big banks, which have largely kept a low profile after the financial crisis while they worked to regain favor with the public and with lawmakers. "And so I feel fairly confident that the Fed will continue to do their job".
Hensarling says: "A community bank that's 0.002 percent the size of J.P. Morgan shouldn't be laboring under a similar set of regulatory burdens". "The bill is geared toward smaller banks - banks under $250 billion in assets". As it is now worded, it would most likely apply to just three banks, all of which take deposits primarily from large asset managers and other banks, rather than Main Street customers, and are known as custody banks. Custodian banks, like Bank of New York Mellon (BNY), State Street (STT) and Northern Trust (NTRS) would be the likeliest to benefit. He also does not think that this bill will lead to another financial crisis.
But Tester didn't seem to believe that either, disputing the notion that large banks might be able to take advantage of the carveout.
You know what shocked me, though?
It would be easy for the bill's authors to clear up the confusion by adjusting the legislative text, said Mike Konczal, a fellow with the liberal Roosevelt Institute.
By using the passage of Dodd-Frank as some kind of reference date, is Warner suggesting that the closure of a bank a month or so after Dodd-Frank became law can be blamed on Dodd-Frank? The arguments that Bove has been making publicly for years are the same specious ones being offered by the bill's co-sponsors, and the trade groups calling for a rollback of banking regulations: Banks are suffering and so, by extension, are consumers, businesses, and the economy at large.
The House approved a bill easing banking restrictions in June and any proposal that passes out of the Senate would have to be reconciled before landing on the president's desk. The bill's supporters anxious adopting the amendments - many of them consumer protections - would cause the underlying bipartisan agreement to break apart.