Brown, an Ohio Democrat who serves as the ranking Democrat on the Senate Banking Committee, fought to become the lead Democrat on that panel in part because of his fears that the GOP-led Senate would roll back Dodd-Frank, passed in the aftermath of the 2008 financial meltdown.
He warns that rolling back the law could lead to a crisis similar to the one that resulted in Congress spending $700 billion to bail out troubled banks including Goldman Sachs and Bank of America in 2008. He said that banks are doing well, and in fact thriving, and there’s no need to undo a law that has protected consumers since it was passed.
“Nobody in Ohio – except some bank executives – is clamoring for this bill,” Brown said. “Nobody is saying, ‘oh we’ve got deregulate the banks. We’ve got to help the biggest banks, we’ve got to help those banks that drove us into the ditch 10 years ago…it doesn’t make sense.”
By contrast, Republicans and 16 Democrats who voted to move forward on the legislation Tuesday see it differently. They said the 2010 law inadvertently imposed a crippling new level of bureaucracy to mid-size and community banks, forcing them to spend money complying that could’ve been freed up for capital.
Senate Majority Leader Mitch McConnell said the 2010 law “has hit Main Street lenders especially hard.” He cites a survey last year saying that community bank compliance costs have risen to an average of 24 percent of net income, while the share of U.S. deposits in small banks shrunk by nearly a quarter.
Sixteen Democrats joined Senate Republicans Tuesday to vote to move forward on the bill. Nearly every Senate Democrat backed the bill when it was passed in 2010. If it passes through the House, it will be the most significant rollback of the 2010 law since it was passed. The vote was 67-32. Sen. Rob Portman, R-Ohio, voted to advance the legislation.
The bill would provide relief to about 25 financial companies with assets between $50 billion and $250 billion, exempting them from high levels of scrutiny by the Federal Reserve.
According to the left-leaning Center for American Progress, the bill would mean that 25 of the 38 largest banks in the United States would no longer be subject to some of the stringent rules imposed under Dodd-Frank. Those banks took $47 billion in Troubled Asset Relief Program bailout funds during the financial crisis.
But in a letter to McConnell and Senate Minority Leader Chuck Schumer, Rob Nichols, president and CEO of the American Bankers Association, said the bill will save smaller banks that have been crippled by the increased regulations.
“There simply is not enough capacity at smaller organizations to read and understand what rules apply; implement, train and test for compliance with those that do; and still have the time and resources to meet with individuals and businesses about their financial needs,” he wrote.
But Brown said the decision to roll back the 2010 law feels like “collective amnesia” about the financial crisis. “It’s like it didn’t happen,” he said.
The Senate will debate the bill for the duration of the week, but its biggest hurdle may be on the other side of the Capitol Hill: The House last summer passed a bill that would repeal the 2010 law to a greater degree, and it’s unclear whether Republicans will back a scaled-down version of such repeal.
Yana Miles, senior legislative counsel for the Center for Responsible Lending, which opposes the Senate bill, concedes that there was “a little bit more care” put into drafting this bill than the House bill and other Dodd-Frank rollbacks.
Still, she said, the “overall harm to consumers far outweighs the benefits.”
“This certainly does open up some windows into the previous bad acts that led to the crisis,” she said.
Rep. Steve Stivers, R-Upper Arlington, a member of the House Financial Services Committee, reacted positively to the Senate bill.
“This bill will give American families more access credit to help them buy a first home, give employers additional financing to expand and hire more employees, and provide regulatory relief for community banks and credit unions who have been crushed by the provisions in Dodd-Frank,” he said.
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