The Senate is Running Out Of Time To Make Up For Missed Opportunities

The Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) became law in May. Touted as a financial regulatory reform measure, the bill provided limited relief mainly to smaller banks.

While those banks and their trade associations surely appreciate the relief, the sad truth is that Senate leaders flubbed the larger opportunity to fundamentally improve the U.S. regulatory framework.

Had Senate Republicans truly wanted to dump the Dodd-Frank framework, for instance, they could have done so last year by passing the House’s CHOICE Act – or pieces of it – through budget reconciliation. They chose not to do so.

Instead, the Senate came up with a tremendously watered-down (compared to the CHOICE Act) bill that failed to include even those reforms that passed the House with strong bipartisan support.

S. 2155 did not repeal one single title of Dodd-Frank. It left them all in place and merely provided special exemptions (generally) for smaller banks.

These exemptions expose the fiction that Dodd-Frank regulations are truly about financial stability. After all, widespread failures of small banks were at the center of at least two major financial crises in the U.S. But the Senate’s approach has a large downside, as well: it further bifurcates the banking industry and increases the power of special interests. (For their efforts, their political opponents still accuse them of deregulating big banks and rolling back Dodd-Frank.)

S. 2155 does nothing to address two core problems of Dodd-Frank: (1) its attempt to maintain safety at commercial banks via more regulations and higher capital at the holding company level; and, (2) giving regulators an enormous amount of discretionary power to dictate exactly how banks can operate.