Point/Counter-Point: Are the Newest Deregulation Moves on Banks Sensible?

An argument over Congress’ newest bipartisanship bill that deregulates banks.



There are many issues that the current 115th Congress can’t agree on: immigration, gun control, the existence of climate change, anything Donald Trump related, ect. But recently in Congress, there has been an idea that has gotten major bipartisan support: banking deregulation. Specifically bipartisan legislation – The Economic Growth, Regulatory Relief, and Consumer Protection Act (or S.2115) – that would rewrite major parts of 2010’s Dodd-Frank Act (a bill that introduced new measures to the banking industry in hopes of avoiding the same pitfalls that lead to the 2008 financial crisis). The new measure would essentially lift many of the Dodd-Frank regulations on banks that are categorized under a certain classification. While legislation that focuses on banking deregulation would usually be championed by Congressional Republicans, many Democrats look to support the measure as well, creating the rare appearance of GASP bipartisanship!


Though. Real talk. On the surface, both Democrats and Republicans supporting a bill that deregulates the banking industry looks bad. It looks even worse if you consider that this has basically been the only piece of legislation that both sides have seen eye-to-eye on in this current session of Congress. However, many supporters of S.2115 insist that the bill is less about deregulating big banks, and more about freeing up capital for small banks to service their communities better. This is a Point/Counter-Point argument for whether or not S.2115 is in fact just benign legislation that creates sensible bank laws or is Congress just bowing down to the interest of big banks?


Arguments in bold-italics are saying that S.2115 is a bowing down to banking special interests, while arguments in plain text say the new rules are sensible. 



I think we’ve hit a new low with Congressional Democrats bowing down to the banking industry over the passage of The Economic Growth, Regulatory Relief, and Consumer Protection Act (aka S.2115). This is truly the darkest timeline.


While I will acknowledge that we may be living in the darkest timeline (with all of us sporting these snazzy thin gotees), but just for the record, the passage of S.2115 has nothing to do with that. If anything, its bipartisan passage gives us hope that government can still be functional, even in this polarizing political climate.


What?! Dodd-Frank was quite literally THE LEAST Congress could have done to reining in big banks and make sure we didn’t get a repeat of the 2008 financial crisis. How is the deregulation, of an already relatively weak banking law, going to help anything?


Well, like usual, you’re over generalizing the argument. While yes, in SOME areas, Dodd-Frank didn’t go far enough in reining in big banks, but in other areas, it might have went too far. This is particularly true for smaller banks. What S.2115 does is loosen the regulatory restraints on smaller banks by raising the threshold for certain federal oversights from banks that have $100 billion in assets to $250 billion. All this does is give banks in that $100 billion range more flexibility to serve communities better by not being burdened with unnecessary regulations.


Actually, I agree with your basic assessment.


You do? I mean, of course you do!


And you’re right. Regional banks in that $100 billion range would really benefit from regulatory thresholds being raised. Estimates have it that the rule change would affect dozens of banks around the US. That would free these regional banks to expand in the types of mortgages they offer, to better help their respective communities.  


See, there you go. Everyone wins!


Hey, hey, not so fast. If freeing up regulatory restrictions for regional banks makes a lot of sense, then why not just raise the regulatory threshold to say… $125 billion? Why $250 billion?


Listen, you have to start somewhere.


But $250 BILLION?!?!? In that range, we start getting into Lehman Brothers territory, and we ALL remember what happened when that mortgage lender failed due to lax regulations. I’ll give you a hint, it rhymes with “cinancial frisis!” 


Alright, I’ll give you that. $250 billion threshold is a little high.


A little high?! A LITTLE HIGH!?! Those banks acting irresponsibly, at the $250 billion threshold, almost brought down the world financial markets! You’re quick to forget that Countrywide Financial, who was equivalent to the diseased monkey from ‘Outbreak’ in terms of the 2008 mortgage crisis, had around $210 billion in financial assets when it failed! So don’t tell me that $250 billion is “a little high.” Financial institutions at that level are the most need of federal oversight, because even if a handful of them were to fail, we’d be screwed!


So what then, economic stagnation is your answer? Because right now, at the current regulatory threshold ($50 billion) is laughable and doing more harm than good. Even Barney Frank – former Massachusetts representative and the “Frank” in Dodd-Frank – agrees with me; going as far as admitting that when drafting the bill, he points to that threshold as being one of THE BIGGEST(!!) legislative mistakes of his storied tenure in the House.


Actually, Barney Frank agrees with me. Wow, this must be so awkward for you…




In a recent CNBC op-ed, he opined that if he were in Congress today, he would vote against S.2115’s measure on increasing to a $250 billion threshold. Also, for the record, his preferred threshold would be in the $125 billion range.


Hey buddy, I think you missed the operative word in that last sentence.


Which would be?


Preferred. The fact that he would have “PREFERRED” the threshold to be $125 billion.


Do you have a point? Or are you just rambling again?


My point is this. Just because he would have liked the regulatory threshold to be raised to $125 billion, doesn’t necessarily mean that’s what exactly will happen. In case you forget, we have a Republican President in Donald Trump and they currently control BOTH the Senate and the House!


Once again, do you have a point?


My point… Congressional Democrats – which Barney Frank most definitely was while he was in office – have to give up something to be part of the process. Raising the threshold is just one of those concessions.


So what, Congressional Democrats sold their political souls just so they can tell people they were “part of the process?”


Wow, look at you channeling your inner drama queen! Democrats was nowhere near, as you put it, “selling their souls.” Major banking institutions like JPMorgan Chase and Bank of America will still be under the strict regulatory standards as they were before. ON TOP OF ALL THAT(!!), The Consumer Financial Protection Bureau (one of the major components of Dodd-Frank) won’t be touched with S.2115. Even Frank himself admits that “90% of the original bill” would still be left intact. His words, not mine!


Ok, my turn. While that all might be true, the 2008 financial crisis wasn’t sparked by the financial behemoths, but by medium sized firms like Lehman Brothers. All it took were a handful of small-to-medium sized financial institutions to collapse, thus sending the world financial markets into a tail spin. What S.2115 does is lift financial oversight over these very institutions that sent the system crashing. HOW DOES THAT NOT CONCERN YOU?!?  


Maybe because multiple analysists, on multiple media outlets, have said that S.2115 doesn’t introduce any new significant risk into the financial system. While it is true that banks and financial institutions below the $250 billion threshold would have less financial oversight than they had before, the chances of these institutions collapsing, like they did in 2008, are highly unlikely.


Yup, because as we all know, financial analysts have never been wrong in the past.


Was that sarcasm? I feel like that was sarcasm.


I’ll let you know in the next financial crisis. 



Work Cited

Stewart, Emily. “Congress Finally Found Something It Can Agree on: Helping Banks.” Vox, Vox, 21 May 2018, www.vox.com/policy-and-politics/2018/5/21/17376244/senate-banking-bill-house-sifi-dodd-frank.

McKenna, Francine. “Newly Signed Bank Deregulation Law Sets Stage for Fed to Take Further Steps.” MarketWatch, MarketWatch, 24 May 2018, www.marketwatch.com/story/house-set-to-approve-bank-deregulation-legislation-2018-05-21.

Ackerman, Andrew, and Ryan Tracy. “Bank Deregulation Bill Clears Congress.” The Wall Street Journal, Dow Jones & Company, 22 May 2018, www.wsj.com/articles/bank-deregulation-bill-clears-congress-1527025690.

Crapo, and Mike. “S.2155 – 115th Congress (2017-2018): Economic Growth, Regulatory Relief, and Consumer Protection Act.” Congress.gov, 24 May 2018, www.congress.gov/bill/115th-congress/senate-bill/2155.

Dewatripont, Mathias, and Jean Tirole. “Macroeconomic Shocks and Banking Regulation.” Journal of Money, Credit and Banking, vol. 44, 2012, pp. 237–254., doi:10.1111/j.1538-4616.2012.00559.x.



Leave a Comment

Filed under News

Leave a Reply

Your email address will not be published.