After the U.S. government bailed out the banks in 2008, they bounced back quickly even as ordinary Americans lost their homes and jobs.
In the last year, banks have seen record profits; we have learned about a series of outrageous and widespread customer abuses by Wells Fargo; and millions of Americans had their personal data exposed to hackers because of a security breach at credit bureau Equifax.
Now, Congress may hand banks billions of dollars of tax breaks at everyone else’s expense.
They’re marking up a bill that, under the fig leaf of some token gestures toward consumer protection, would deliver early holiday gifts to banks large and small.
The Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155) would sharply cut back the post-crisis mandate that regulators provide enhanced oversight to a set of very large banks. In fact, the bill removes that mandate for 25 of the 38 largest banks.
Together, these banks account for over $3.5 trillion in banking assets, more than one-sixth of the U.S. total. They got about $47 billion in bailout funds during the crisis. Yet, this legislation would give the green light to Trump regulators to ease off on regulation, inviting a return to the pre-financial crisis world where regulators dropped the ball on bank oversight.
That’s not the only way this legislation weakens post-crisis reforms. It would strip away multiple mortgage-lending protections, especially for buyers of manufactured homes (aka mobile homes), who are likely to face higher costs.
It would limit consumer protections for customers of banks with less than $10 billion in assets, including loan disclosures, anti-foreclosure safeguards and other protections against shady lending.
It would create a new loophole in the Volcker Rule that would open the door for small and medium-sized banks to engage in reckless, speculative trading with customer deposits.
Against all these sugar plums for industry, S.2155 includes only minor benefits for consumers, such as one free freezing and unfreezing of their credit per year. The small number of very limited consumer measures don’t even begin to counterbalance the impacts of bank deregulation. How about a focus on the pressing economic needs of individuals and communities instead?
Supporters of S.2155 argue that it’s acceptable because it doesn’t include some of the biggest items on Wall Street’s wish list. We are glad that increased public attention to the impact of banking rules on all of our financial security is creating some constraints on giveaways. But whether or not Wall Street gets everything it wants in this bill is not the right standard.
Banks are not suffering — quite the contrary. There is no evidence that financial regulation is harming the workings of the economy for most people. The latest data from the Federal Deposit Insurance Corporation — for the third quarter of this year — showed a 5-percent increase in profits over the same period last year.
Community banks recorded a 9-percent increase. Those increases are after banks showed record-setting revenues last year. Over 95 percent of community banks turned a profit in 2016, up from 78 percent in 2010, the year the Dodd-Frank Act was passed.
Ordinary American families saw no such increase in their earnings this year. But they’re taking one on the chin at the other end of Pennsylvania Ave. as the Trump administration attempts to hamstring the Consumer Financial Protection Bureau by trying to install someone as director who has said it should not exist.
The work they are trying to disrupt? This agency, only 6 years old, has won $12 billion in relief for over 29 million American consumers.
These attacks are all the more reason for Congress to be focused on the public interest and consumer protection.
With the Trump administration appointing industry-friendly regulators, supporting this bill sends the message that members of Congress want to join the push in that direction and that even though banks are doing fine, policymakers should put their demands ahead of the stability of the financial system and the welfare of the public.
There is still time to stop this bill. There has been no hearing on the legislation, and as issues are brought to light in the markup, Senators should remove themselves as co-sponsors. Senators should not allow it to be jammed though as an attachment to must-pass legislation.
At a bare minimum, the public deserves an open debate on the Senate floor.
The job of the U.S. Senate is to legislate on behalf of the American people as a whole. Senators should be choosing to fight for tougher rules to hold big banks accountable, for better protections of consumer data and for relief for student-loan borrowers, instead of prioritizing the interests of finance over those of ordinary Americans.
Lisa Donner is the executive director of Americans for Financial Reform, a progressive organization that advocates for financial reform in the United States, including stricter regulation of Wall Street.
This piece first appeared in the Dec 5th edition of The Hill