WASHINGTON — A bipartisan Senate alliance working on a bank regulatory relief bill appeared even stronger Tuesday as it worked to minimize changes in the interest of moving the legislative package to the Senate floor.
The legislation is the culmination of years of negotiations between moderate Democrats and Republicans on the Senate Banking Committee. While the bill is not as ambitious as other relief proposals, it is the banking industry’s best prospect to roll back financial regulations since the Dodd-Frank financial reform law was passed in 2010.
Lawmakers supporting the bill made a pact not to agree to changes – even changes they favored – so they could keep the alliance intact. As a result, the panel appeared unlikely to make any substantive changes to the bill.
“There are going to be some amendments today that I think have good merit. Very reluctantly I am going to have to vote against most if not all of them because I gave my word,” said Sen. John Kennedy, R-La. But he added there was no guarantee he would support the bill on the Senate floor since he wants stricter curbs on the credit reporting agencies.
Senate Banking Committee Chairman Mike Crapo, R-Idaho, said that with the legislation being a “bipartisan compromise,” it wasn’t going to please everyone. “None of us got everything,” he said.
Speaking later to reporters, Crapo said the show of unity was “the same dynamic that was going through as negotiations occurred.” He negotiated the final bill — which includes raising the asset threshold for “systemically important” banks from $50 billion to $250 billion, simplified capital requirements and a Volcker Rule exemption for small banks — with a core of moderate Democrats after his talks broke down with Sen. Sherrod Brown of Ohio, the committee’s ranking Democrat who opposes the bill.
However, Crapo added that the bill could be changed as it makes its way to the Senate floor.
“The Senators who support the bill are still very willing to negotiate and that includes those who are not on the committee and those who may not support the bill,” said Crapo.
Still, with the exception of some technical changes, the committee as a whole seemed uninterested in considering many amendments, including those proposed by progressive members who objected to the deal that was made between Republicans and four moderate Democrats on the panel.
“These amendments are offered in good faith,” said Sen. Elizabeth Warren, D-Mass. “I am very sorry to hear my colleagues say that deals cut behind closed doors” will stop them from voting for “good amendments.”
But members of Warren and Brown’s party who supported the compromise held strong. Perhaps the strongest indicator of the commitment from Democrats supporting the deal was when Sen. Catherine Cortez Masto, D-Nev., introduced an amendment reinstating the Consumer Financial Protection Bureau’s politically contentious arbitration rule. The four moderate Democrats who had cut the deal with Crapo — Joe Donnelly of Indiana, Heidi Heitkamp of North Dakota, Jon Tester of Montana and Mark Warner of Virginia — all voted against the amendment.
“We have been at this for five or six years and … this is the final product,” said Tester.
Warner said, “I believe we are kind of at the breaking point” of what can be negotiated “and I will be voting down … many of those amendments.”
Some Republicans, despite supporting the package, said their preference was for more dramatic regulatory relief.
Sen. Pat Toomey, R-Pa., said, “I am going to support this [bill] because I think it certainly does more good than harm.”
However, Toomey said he wanted to work with other members on the panel to go further to ease regulations for big banks including changes to liquidity standards, capital requirements for large banks known as the “advanced approaches” and eliminating a numerical threshold for “systemically important” institutions.
“No one can seriously argue that a bank of $250 billion in assets is intrinsically more risky than a bank with $249 billion in assets,” said Toomey.
More progressive members on the panel said they opposed the bill because it did not go far enough to provide additional consumer protections.
“I support providing some relief to small banks and credit unions, but I think this bill unwisely chooses to do so by rolling back protections for people from the very activities that led to the crisis,” said Brown.
However, the bill’s support in the Senate appears to be expanding, making its passage even more likely. During debate, Crapo indicated that Delaware Democrats Tom Carper and Chris Coons will both be joining 10 other Democrats and 10 Republicans that co-sponsored the legislation.
“You are going to have a filibuster proof majority for this bill on the floor,” said Sen. Brian Schatz, D-Hawaii, who opposed the legislation.
Under the bill, banks above the new proposed $250 asset threshold would still be subject to enhanced supervision under Dodd-Frank. Banks below the threshold would be released from that supervision unless the Federal Reserve separately designated them as risky.
The bill would also simplify capital requirements for well-capitalized banks with assets of less than $10 billion, exempt such institutions from the Volcker Rule and give federal savings associations with assets below $15 billion more flexibility to operate as national banks. Banks with less than $5 billion in assets would be able to file shorter call reports.
Mortgages held on portfolio for banks and credit unions with less than $10 billion in assets would also meet the criteria of the CFPB’s “Qualified Mortgage” rule.