WASHINGTON —In what would be good news primarily for banks but also for the credit union regulatory agenda, a number of Democrats have signed onto a semi-bipartisan plan in the Senate to loosen financial regulations, most especially those enacted as part of 2010’s Dodd-Frank Act.
The proposed legislation would allow hundreds of smaller banks and all credit unions to avoid certain elements of federal oversight, including stress tests, by raising to $250 billion from $50 billion the definition of “systemically important financial institutions.” There are just 10 financial institutions in the U.S. with assets of more than $250 billion. Banks in the United States are subject to the stricter oversight.
The legislation would also ease a number of other provisions, including mortgage lending rules
Sen. Majority Leader Mitch McConnell (R-KY) is expected to bring the bill to the Senate floor within the next month, The New York Times reported. A number of Democrats have indicated support for the legislation, even as others within their party warn of a return to reckless behavior by Wall Street, the Times reported.
“This bill increases the risk of another taxpayer bailout, and I will continue to challenge supporters of this bill — from both parties — to explain why they stand on the side of big banks instead of working families,” said Sen. Elizabeth Warren (D-MA).
Warren’s criticism of the rollback comes at the same time she has indicated support for loosening certain anti-money laundering laws, as CUToday.info reported here.
Rob Nichols, president of the American Bankers Association, told The New York Times the legislation would correct what banks view as regulatory overreach borne of a hasty legislative effort to shore up a cratering financial system after the 2008 crisis. “What I do think is significant here is that you have a recognition that’s been building for several years that parts of the policy response were misguided, ill-conceived and missed the mark,” Nichols was quoted as saying.
According to the Times, the bill that is working its way through the Senate was brokered primarily by Senator Mike Crapo (R-ID), who chairs the banking committee, and moderate Democrats such as Sen. Heidi Heitkamp of North Dakota, Sen. Jon Tester of Montana, Sen. Joe Donnelly of Indiana and Sen. Mark Warner of Virginia. In all, 11 Senate Democrats are co-sponsoring the bill, making its passage in the Senate likely.
Hietkamp is among those who have said the bill would help credit unions.
“A lot of what was Too Big to Fail under Dodd-Frank became ‘too small to succeed’ because of the onerous regulatory burdens,” Heitkamp was quoted as saying.