Almost 10 years to the day Bear Stearns’ near collapse accelerated the worst financial crisis in generations, Congress is pushing to relax rules that were designed to prevent one from happening again.
A bill with strong support from both sides of the aisle is heading to a vote in the Senate. It would loosen regulation for smaller banks and significantly raise the threshold for a bank to be considered so vital to the financial system that it requires the most rigorous oversight.
Banks have complained for years that Dodd Frank added costly layers of legal and compliance and forced them out of lucrative trading and other activities. Smaller banks have argued that removing restrictions would allow them to lend more money and support local economies and consumers. The Senate bill, sponsored by Republican Sen. Mike Crapo, includes eight bills that have already passed the House with broad support.
The federal government had to inject more than $700 billion into the banking system in 2008 to avert the collapse of some of the biggest institutions, which were laden with toxic securities. Lehman Brothers outright failed, and the government required the remaining big banks to take federal infusions of cash.
Dodd Frank was enacted in 2010 to address some of the problems that led to the crisis, but it has always had its critics. One of its most prominent foes is the Chairman of the House Financial Services Committee, Jeb Hensarling of Texas. The committee has had 65 hearings on Dodd Frank and held 24 hearings on legislative efforts to change it. It has sent 18 bills to the House to repeal or fix it.
Some have said the Senate bill doesn’t go far enough. Crapo introduced an amendment to his bill in recent days to address some of these concerns. A vote in the Senate could come this week, and the two chambers are expected to reconcile their bills after that.
Some Democrats are still fighting to preserve the rules, named after Democrats Chris Dodd and Barney Frank, filing dozens of amendments.
“Washington’s amnesia is legendary,” Massachusetts Sen. Elizabeth Warren said in a speech in the Senate on Thursday. “This bill isn’t about the unfinished business of the last financial crisis. This bill is about laying the groundwork for the next one.”
Banks have been fighting Dodd Frank almost since it was signed into law by President Obama a decade ago. The financial industry, which includes finance, insurance and real estate, spent $519 million on lobbying last year alone, according to the Center for Responsive Politics. That was second only to the healthcare industry. Specifically, the securities industry paid $97 million, and the top investment bank on the contribution list was Goldman Sachs, at $3.3 million.