Question of the Day: Why Are Democrats Backing the Crapo Bill?

Mike Konczal asks an excellent question today:

Why Are Democrats Helping Trump Dismantle Dodd-Frank?

The Economic Growth, Regulatory Relief, and Consumer Protection Act—aka the Crapo bill—is allegedly meant to help out small community banks who are being whipsawed by onerous regulations designed for megabanks. That’s why a dozen Democrats say they’re in favor of it. But as I mentioned yesterday, community banks are doing fine:

Lightening the regulatory load on community banks is mostly a red herring. And besides, if that were the real reason for the bill then that’s all it would do. But it does much, much more. Here is shorter Mike Konczal:

This bill goes far beyond the health of community banks and credit unions. It removes protections for 25 of the top 38 banks; weakens regulations on the biggest players and encourages them to manipulate regulations for their benefit; and saps consumer protections….Dodd-Frank introduces regulations for banks with assets of more than $50 billion….The bill would move that line up to $250 billion.

….Dodd-Frank introduced more “stress tests”….The Crapo bill reduces their frequency….The Crapo bill will introduce a one-word change from “may” to “shall” that will pave the way for the biggest, most politically connected financial firms to argue that regulations should be tailored to be weaker for themselves….It allows community banks to violate the Volcker Rule, introduced in Dodd-Frank to prevent banks from engaging in hedge-fund-like gambling with their own funds.

Foreign banks that pose major risks, such as the Trump-friendly Deutsche Bank, will see their United States subsidiaries deregulated with the bill. It attacks the supplemental leverage ratio….The Congressional Budget Office not only assumes that it is 50 percent likely these megabanks will abuse this loophole, but also that this bill increases the chance and cost of a financial crisis overall….This bill also hurts consumers. It removes protections on mobile homes and appraisal requirements in rural areas….The Crapo bill will exempt banks that make fewer than 500 mortgages — which includes nearly 85 percent of banks — from reporting important mortgage data.

Why on earth are any Democrats, centrist or not, supporting this? At the very least, as Konczal points out, they should get something substantive in return for their votes. But they haven’t even asked for anything. In November it would be handy for Democrats to paint Republicans as the party of Wall Street. But how can they do that if the only reason a Wall Street giveaway like this passes is with Democratic votes?

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