April 4, 2018
EDITORIAL BOARD ALERT
House Could Make Senate’s Wall Street Deregulation Package Even Worse
When lawmakers in the U.S. House of Representatives return from the Easter recess, they could take up the “Bank Lobbyist Act” (S. 2155) passed by the U.S. Senate in March. House Republicans could make this already troubling deregulatory legislation even worse by adding any of dozens of amendments that already have been approved by the House Financial Services Committee or the full House.
Please urge lawmakers to oppose these special favors for Wall Street banks as well as the underlying bill – and to stop deregulating large financial institutions.
Here are just a few of the provisions that could be added to the bill:
- H.R. 4545 would set up a bank-friendly appeals office that would be empowered to overturn decisions by agencies such as the U.S. Consumer Financial Protection Bureau (CFPB), the Federal Reserve and the Office of the Comptroller of the Currency;
- H.R. 3072 would remove any asset threshold for systemically important banks – potentially allowing some of the biggest banks, whose collapse could trigger a global economic meltdown, to escape stricter oversight;
- H.R. 1116 would force regulators to put the costs of new standards to financial institutions ahead of the benefits to consumers and the public;
- H.R. 3948 would limit the ability of the U.S. Securities and Exchange Commission to police high-speed, high-frequency and automated traders, even when their trading strategies could destabilize the financial system;
- H.R. 3746 would block the CFPB from regulating financial products offered by insurance companies. This measure, had it been law, might have stopped the agency from investigating and punishing Wells Fargo after one of its subsidiaries improperly charged 500,000 customers for auto insurance they didn’t need;
- H.R. 3911 would weaken oversight of the major credit rating agencies, such as S&P and Moody’s, which were at the center of the 2008 financial crisis because they gave inflated ratings to toxic securities that were based on subprime mortgages;
- H.R. 2148 would prevent regulators from requiring banks to hold additional capital to protect themselves from losses on highly risky commercial real estate loans; and
- H.R. 4293 would stop the Federal Reserve from stress testing big banks to determine their soundness, giving banks a veto over the standards used to test them and limiting the frequency of these tests.
Public Citizen opposes the Senate-passed legislation and the House’s array of awful amendments, but we have no objection to helping small, community banks – the ostensible justification proponents have given for this legislation. However, the legislation already goes far beyond policies that would help community banks, and these amendments are packed with even more special favors for large institutions. If these changes are made, they could destabilize our financial system and lead to another economic meltdown.
The Senate-passed version of the bill would exempt 25 of the nation’s largest banks – which received nearly $50 billion in bailout funds 10 years ago – from needed regulatory oversight. If it existed today, Countrywide would have been in the same class as these banks. Countrywide’s bad subprime mortgages played a major role in crashing the economy, as these loans were repackaged into securities that deliberately concealed the considerable risk they contained.
In addition, the Senate bill would let banks engage in the same kinds of risky behaviors that caused the 2008 financial crash, allow more predatory lending to homebuyers, grant immunity to Equifax from lawsuits to hold the credit reporting agency accountable, reduce the reporting of racial discrimination in mortgage lending and make taxpayer-funded bank bailouts more likely.
It is troubling that this deregulatory package has support from 17 Senate Democrats – an ugly reflection of Wall Street’s political clout in both parties, purchased through billions in political spending over many decades. Records show that the financial sector is the most lucrative source of campaign contributions for many of the Senate Democrats who backed the bill. Even more concerning are press reports that the bill’s supporters could benefit financially from its passage.
Washington insiders are telling a fairy tale about centrist Democrats up for reelection aiming to demonstrate bipartisanship and anxious Republicans eager to prove they can govern. But among the public, there is overwhelming bipartisan opposition (PDF) to Wall Street deregulation, and Republican voters support tough oversight of Wall Street almost as strongly as Democrats.
The truth is that this deregulatory bill is the latest in a series of corrupt paybacks to Wall Street orchestrated by bank lobbyists. In October, congressional Republicans voted to allow forced arbitration rip-off clauses in consumer financial contracts. In November, President Donald Trump appointed Wall Street lapdog Mick Mulvaney as interim director of the CFPB. And in December, Republicans passed a package of tax giveaways to millionaires, billionaires and big corporations.
When Washington rolls back Wall Street rules, Americans suffer. It happened in the 1980s with savings and loans deregulation, which led to a real estate collapse. It happened again when deregulatory measures passed in the 1990s and 2000s led to the 2008 financial crisis. That crisis and the Great Recession that followed cost our economy up to $14 trillion, destroyed 8.7 million jobs and caused pension funds for workers to lose nearly a third of their value. Millions of Americans lost their homes, their retirement savings and saw steep declines in their paychecks. Banks recovered quickly, but many Americans did not. It could happen again with this bill.
Please sound the alarm and warn your readers about the dangers of deregulating Wall Street.