Senate advances bill to loosen bank regulations
Washington — The U.S. Senate voted Tuesday to advance legislation that rolls back some of the restrictions adopted eight years ago after the financial crisis.
The bill has split Senate Democrats, who almost all backed the reforms put in place by the 2010 Dodd-Frank law.
Sens. Debbie Stabenow of Lansing and Gary Peters of Bloomfield Township say they intend to support the legislation, along with several other Democratic colleagues representing states won by President Donald Trump in 2016.
The bipartisan measure is expected to pass the Senate this week, with 16 Democrats voting with Republicans on the first procedural vote Tuesday.
The bill raises the threshold established by Dodd-Frank to trigger stricter scrutiny by the Federal Reserve to $250 billion in assets, up from $50 billion – exempting about 25 financial companies. It also excepts banks with fewer than $10 billion in assets from rules prohibiting proprietary trading.
Supporters argue the measure will provide relief for community and regional banks burdened by regulations imposed by Dodd-Frank, but opponents point out provisions that would benefit large U.S. institutions.
Peters, a former financial adviser, said he believes the current regulatory framework is “awfully onerous” for smaller financial institutions. He’s concerned that large banks have continued to put smaller institutions out of business since the financial crisis.
“That’s not healthy. We’ve got to create a vibrant, competitive marketplace for regional banks, community banks and credit unions, and this bill takes away some of the regulations that were difficult for them and didn’t appreciably deal with any kind of systemic risk to the economy,” said Peters, who co-sponsored the bill.
“Large banks like having regulation that applies to everybody because they know they have the resources to comply, and smaller institutions don’t. That puts them at a competitive advantage, and we should never allow that.”
Stabenow of Lansing is also sympathetic to the complaints of small and regional banks, saying the nation has lost 14 percent of small banks in rural communities due in part to regulations imposed by Dodd-Frank.
“The things I think are most critical to large banks and accountability – we have to have strong accountability – those things are not touched,” Stabenow said of the bill.
Democratic critics argue the bill could put consumers at risk and potentially lead to another financial crisis.
Sen. Sherrod Brown, D-Ohio, said Washington is suffering from “collective amnesia.” He highlighted an analysis out this week from the nonpartisan Congressional Budget Office indicating the bill would increase the probability of a large bank failure and add $671 million to the deficit.
“So we’re going to weaken the rules, and pay Wall Street for the privilege of doing it,” Brown said Tuesday during debate.
“I support targeted relief for these banks and regional banks that do things right and play by the rules. And I wanted to give more help to average Americans who have to cope with unfair tricks and traps. But that’s not what this bill is.”
The nonpartisan Center for Responsible Lending says the bill would expose consumers to reckless financial practices by weakening protections such as exempting lenders from appraisal requirements for rural homes.
“One of the things we’re really concerned about is the scope and extent of the rollback that’s really focused on some of the behaviors that were so problematic during the recession,” said Scott Astrada, the group’s director of federal advocacy.
If the bill passes, it’s unclear how Senate leaders will reconcile it with the U.S. House, which passed dozens of Dodd-Frank reform bills in recent months. Some of those bills could potentially be amended to the Senate bill.
Republican Rep. Bill Huizenga, a senior member of the House Financial Services Committee, said the Senate legislation is a “good start,” but he’ll push to include a measure he says would improve lower-income consumers’ access to credit.
His bill, which passed the House last month, would adjust the regulatory definition of a “qualified mortgage” to exclude certain title insurance-related points and fees, even when the lender or its affiliates receives the fees.
Huizenga says it would give consumers the convenience of “one-stop shopping” during the mortgage process and dismissed concerns that it would allow title insurers to raise prices, noting such costs are regulated by 47 states.
Detroit-based Quicken Loans, one of the nation’s largest mortgage lenders, has an affiliated title insurance company and could benefit from Huizenga’s bill.
Peters said the banking legislation that advanced Tuesday in the Senate includes a measure he authored with Sen. Shelley Moore Capito, R-West Virginia, to help private student loan borrowers who default on their loans.
It would allow a borrower who successfully makes a series of payments on time to remove their previous student loan default from their credit report “like it never happened,” Peters said.