US Senate Greasing Skids for Next Bank Crash

Lehman Brothers 1850-2008 (AP Images)

On Tuesday, the U.S. Senate voted to begin floor debate on a bill (S. 2155) that would weaken regulations of banks, large and small, and grease the skids for the next bank crash. After the severe bank crash of 2008, in order to guard against future such crashes, Congress passed the Dodd-Frank law, which enacted the regulations the bill would now weaken. The Congressional Budget Office (CBO) scored the bill for budget costs, and figured $671 million over ten years. But the CBO said its estimate was "subject to considerable uncertainty" due to a "slightly greater" "probability in any year that a systemically important financial institution (SIFI) will fail or that there will be a financial crisis." However, in 2008, we saw what some of the real cost to the country could be: $821 billion to the federal government, plus $3.4 trillion in real estate wealth and 5.5 million jobs lost.

The banking bill started out with an aim to aid small community banks and credit unions. But soon lobbyists pushed in terms aiding big bank profits. And so the bill became known as the "Bank Lobbyist Act." A few of the more risky terms would:

  • raise the limit over which a bank is big enough to get more oversight and regulation. The limit would go from $50 billion to $250 billion. Some of the most damaging failures of 2008 were for banks in that asset range. Today, 25 of the nation's largest banks fall in that range, and would be freed for more profits -- and more systemic risk.
  • lower the amount of capital required to back $100 in loans from $5 to effectively $3.50. That change was the plum that the huge financial corp Citigroup lobbied for.
  • change the frequency of "stress tests," which a big bank must undergo to make sure it is sound, from semi-annual to an unspecified "periodic" interval.

The Senate Banking Committee chair, Mike Crapo (R-ID), and ranking member, Sherrod Brown (D-OH), negotiated on the banking bill for months, before Brown walked away. Brown said:

There was some agreement that we should help community banks. But it starts with changing the rules for small banks and then you have to do it for the big guys.

But, instead of following Brown, the next day four committee Democrats -- Joe Donnelly (IN), Heidi Heitkamp (ND), Jon Tester (MT), and Mark Warner (VA) -- resumed negotiations. Within weeks, they reached agreement with Republicans, and sent the Bank Lobbyist Act out of committee, 16-7 (R's 12-0; D's 4-7). Democratic staffers believe that Donnelly, Heitkamp, and Tester -- being up for re-election in Trump-voting states -- think it would help them to say they were "bipartisan" on something. And, we might also imagine that it would help them with their campaign financing. The three senators have received the most money from commercial banks during the 2018 election cycle so far. But Brown, also from a Trump-voting state, does not think that way:

I don’t hear an outcry, whether in Appalachia or downtown Toledo, saying be bipartisan and give lots of stuff to big banks.

17 Democrats joined all Republicans to send the banking bill to the Senate floor, 67-32. So, it would take changing 8 votes to stop the Bank Lobbyist Act by filibuster. But Senate Minority Leader Chuck Schumer, who did a good job of keeping the Democratic caucus together for the Republican tax cut bill, has been on the sidelines for this one.

The Bank Lobbyist Act, as it sits today, is very unlikely to be its final form. Since Tuesday, 146 amendments have been proposed. Also, last summer the House passed a more severe Dodd-Frank roll-back bill. And Republican leaders are aiming to stuff enough of the House bill into the Senate product to get the House to pass it without going to House-Senate conference. Senate debate is set to continue on Monday (March 12).

Democratic Senators Voting Bank Lobbyist Act to Floor

The following Democratic senators joined Republicans in voting to proceed with the Bank Lobbyist Act:

  • BENNET (CO)
  • CARPER (DE)
  • COONS (DE)
  • DONNELLY (IN)
  • HASSAN (NH)
  • HEITKAMP (ND)
  • JONES (AL)
  • KAINE (VA)
  • KING (ME) - Independent caucusing with Democrats
  • MANCHIN (WV)
  • MCCASKILL (MO)
  • NELSON (FL)
  • PETERS (MI)
  • SHAHEEN (NH)
  • STABENOW (MI)
  • TESTER (MT)
  • WARNER (VA)

Action

Petition to Chuck Schumer: "Please speak out loudly and forcefully against the Bank Lobbyist Act, and tell your Democratic colleagues to drop their support of the bill.”

Call and write your senators.

Help Sherrod Brown win re-election in 2018.

~~~

Image: Lehman Brothers 1850-2008 (AP Images)

(From The Paragraph.) [Sources & Notes]

* * *

By Quinn Hungeski, TheParagraph.com, Copyright (CC BY-ND) 2018

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Comments

EyeRound's picture

It's important to stop this bill. It's my understanding--but correct me if I'm wrong--that the bill also modifies banks' capital requirements by allowing all banks to re-classify municipal bonds, now counting them as "liquid assets." Municipal bonds should be as "illiquid" as it gets, to protect the budgets of towns and cities across the nation. As it stands, if this bill passes and if / when the next crash comes, banks large and small will be unloading municipal bonds, thereby tanking local access to capital and forcing localities into further austerity. Austerity here will fuel further "privatization," selling off local assets like the library. One of the major efforts of the Republican fiscal game plan is privatization. Dems who support this need to be removed from office as quickly and thoroughly as possible.

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13 users have voted.
hungeski's picture

@EyeRound And the sequence of events you describe I think could well happen.

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7 users have voted.

"We dance round in a ring and suppose, But the Secret sits in the middle and knows." - Robert Frost

snoopydawg's picture

and they do something that causes the economy to crash, then they need to own up and have to deal with the consequences themselves. Why should we be on the hook to bail them out? Again!

This is legalizing robbery. Plain and simple. Not giving my permission to keep my money.

The democrats who are voting for this are just the ones who are out front on this. Don't be fooled in thinking that the other democrats wouldn't vote for it if their votes were needed. This is what they want us to think. Warren, Bernie and a few others are telling us to write our congress members and put a stop to this. But Schumer has all kinds of options to stop them from voting for it. Remember how Joe Lieberman played us? He was the lone holdout on the ACA, yet he still got to keep his committee and that's after he campaigned for McCain against Obama. "Nope, there is nothing we can do to get him to change his mind." BullPuckee!

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14 users have voted.

The Democratic Party under Bill Clinton transformed itself into the traditional Republican Party, and the Republican Party moved, was pushed, so far to the right it became insane

Alligator Ed's picture

@snoopydawg The community banks are are a puny minority in terms of cash on hand. If only the small banks crash, no big deal. FDIC could easily cover the losses--if they want to. But they probably won't because the Big Boys on the Street call the shots and, by the way, people, fuck you!

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8 users have voted.
BrutallyHonest's picture

@snoopydawg All the more reason to get rid of capital entirely.

However, I understand that a majority of our country can't fathom living in an economic system without capital. So if we need a bridge between capitalism and no capital we should setup 6 important worker cooperatives throughout our country.

These 6 would be worker cooperative...
...Banks
...Security
...Internet
...Farming/Food
...Education
...Power

I so wish this was true:"So, you sociopaths acquired a lot of numbers on computers, paper money, and own the United States government? Well we are the United People of America and you know the UBI fraud you wanted to pull on us? We just pulled it on you. The Banks of the UPA run on UBI, but get this, everyone has 900quadrillion $'s in their bank accounts, oh and since everyone is a worker and boss too we have no need for you and your ilk. CEO's and anyone just a boss has no value in our society!"

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9 users have voted.
thanatokephaloides's picture

This may be redundant, @BrutallyHonest , but these items:

These 6 would be worker cooperative...
...Banks
...Security
...Internet
...Farming/Food
...Education
...Power

should be run as worker co-operatives, but under fully nationalized ownership. In other words, owned by the Nation's whole worker class.

And where you have "Power" I would put all commercialized Energy. Private citizens could and should own little energy producers on their own lands; but sellers of energy should be nationalized worker co-operatives as discussed above.

And you're right: we need the boss class clean gone. They produce nothing, and right now they own everything. Bad

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9 users have voted.

"I say enough! If Israel wants to be the only superpower in the Middle East then they can put their own asses on the line and do it themselves. I want to continue to eat."
-- snoopydawg

Alligator Ed's picture

@thanatokephaloides but imagine the heads exploding on the conservative media about the "g-dam Communism" brutally honest and you have proposed. We would see exploding eyeballs like Adam Schiff's from all concerned including the so-called Democraptic party.

DiabloStopBomb

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3 users have voted.

@Alligator Ed

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5 users have voted.

@peachcreek

Better exploding heads than talking heads on the propaganda media.

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3 users have voted.

Psychopathy is not a political position, whether labeled 'conservatism', 'centrism' or 'left'.

A tin labeled 'coffee' may be a can of worms or pathology identified by a lack of empathy/willingness to harm others to achieve personal desires.

thanatokephaloides's picture

@Ellen North

Better exploding heads than talking heads on the propaganda media.

Oh, I don't know..... sometimes I like Talking Heads on the propaganda media!

Smile

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0 users have voted.

"I say enough! If Israel wants to be the only superpower in the Middle East then they can put their own asses on the line and do it themselves. I want to continue to eat."
-- snoopydawg

mimi's picture

@Alligator Ed
crooked oligarchs loving capitalism to death. Time for the media and talking heads to get that into their heads.
Aggressive

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2 users have voted.
Alligator Ed's picture

@mimi Quite true. But the mental Neanderthals on the right still don't get that. According to them Russia is still Commie and so is any group like c99.

New russian

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1 user has voted.
coloradoblue's picture

he is nothing more than a corporate whore. He'll always vote for the rich and powerful and against his voters. He'll only vote with us little people on small things that don't matter to his owners.

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4 users have voted.

Dear Dems: You lost the WH, Senate, House, dozens of governors, state level SOS and AG and about 1,000 state legislative seats. Maybe...you're doing something wrong.

hungeski's picture

@coloradoblue bennetBankBucks.jpg
https://twitter.com/Public_Citizen/status/972187657051746304

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1 user has voted.

"We dance round in a ring and suppose, But the Secret sits in the middle and knows." - Robert Frost

thanatokephaloides's picture

@coloradoblue

Don't bother contacting Bennet, he is nothing more than a corporate whore. He'll always vote for the rich and powerful and against his voters. He'll only vote with us little people on small things that don't matter to his owners.

Fortunately, the frack barons don't really care one way or the other about marijuana.

I contacted him anyway. He needs to know that Coloradoans don't necessarily buy his line of crapola.

DiabloBomb

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1 user has voted.

"I say enough! If Israel wants to be the only superpower in the Middle East then they can put their own asses on the line and do it themselves. I want to continue to eat."
-- snoopydawg