Senate Democrats on Thursday rejected Federal Reserve Board Chairman Jerome Powell’s assurances that a bipartisan bill offering relief from Dodd-Frank rules wouldn’t loosen rules on foreign megabanks like Deutsche Bank and Santander.
During a Senate Banking Committee hearing, Powell told proponents of the bill, which is expected to be considered next week, S. 2155, that it wouldn’t lessen Fed oversight of those global banks.
The possibility came up because the centerpiece of the bill would loosen some of the tougher Dodd-Frank requirements for banks with between $50 billion in assets and $250 billion in assets, a provision meant to provide relief to regional banks like Suntrust or Fifth Third Bank that are large but quite different from Wall Street megabanks.
But Senate liberals opposed to the bill, and some regulatory experts, have charged that global megabanks with U.S. subsidiaries with under $250 billion in assets would also be spared from some of the toughest oversight measures required by Dodd-Frank.
Santander, for example, headquartered in Spain, is one of the largest banks in the world. But its U.S. bank has around $74 billion in assets.
In questioning with committee chairman and bill author Mike Crapo, R-Idaho, though, Powell said the Fed would oversee those foreign megabanks based on their global assets, not based on the size of their domestic affiliates.
Later, Democrat Jon Tester of Montana, a supporter of the bill, asked Powell directly if the bill would deregulate foreign megabanks. “It does not, according to my reading,” Powell replied.
But Sherrod Brown, an Ohio Democrat opposed to the bill, didn’t leave it there. He noted that outside analysts, such as former Fed governor Sarah Bloom Raskin, have concluded that foreign megabanks would receive relief from the bill. Brown asked Powell what would happen if a U.S. subsidiary of a global megabank sued the Fed for unfair treatment relative to other banks its size, and Powell said he’d have research the answer.
Shortly after the hearing concluded, a prominent Wall Street countered his testimony. Dennis Kelleher, head of the group Better Markets, said that the bill wouldn’t require deregulating foreign-owned banks, but that such deregulation would happen anyway.
“The bottom line is that S. 2155 does not require the deregulation of foreign banks, but they will no doubt be deregulated, which will once again put U.S. taxpayers on the hook for bailouts of foreign banks rather than the taxpayers of those foreign countries,” he said.
