Liberal Massachusetts Sen. Elizabeth Warren is set to go to war this week against the bipartisan Senate banking relief bill, and the bill’s authors, including Democrats, are pledging to defend it from attacks.
“I’m going to be very, very aggressive” in pushing back against false claims, said Sen. Heidi Heitkamp, D-N.D.
Here are the likely attacks against the bill, authored by Senate Banking Committee Chairman Mike Crapo, R-Idaho:
1. It would mean less Federal Reserve oversight of megabanks
The bill is intended to help regional banks, such as Birmingham, Ala.-based Regions Bank and Cincinnati-headquartered Fifth Third Bank, by making Federal Reserve oversight less burdensome for banks with less than $250 billion in assets, up from $50 billion now. Banks under that threshold would get some relief from the annual stress tests conducted by the Fed, as well as other requirements.
There’s widespread support for easing the burden on community banks.
But Warren said Tuesday that Wall Street megabanks also might get that relief.
The issue is that the bill tells the Fed that it “shall” differentiate between banks in imposing oversight rules on them. Warren and some outside groups said the provision would open the door to megabanks suing the Fed to be regulated less.
The bill’s supporters reject that claim, on the grounds that banks rarely sue the Fed.
“What we’ve done is make no changes to the applicability of enhanced prudential standards to the big banks above $250 [billion],” Sen. Mark Warner, D-Va., said on the Senate floor Tuesday.
2. It would weaken capital requirements for big banks
Under the 2010 Dodd-Frank law, big banks face higher capital requirements, meaning they must fund their activities less with debt and more with equity shares.
The Crapo bill would lessen one of the capital requirements for custody banks, such as State Street and BNY Mellon, whose main business is safekeeping assets for other firms.
On Monday, though, the Congressional Budget Office suggested that the Fed might interpret the bill in such as way as to allow JPMorgan Chase and Citigroup, two megabanks that aren’t just custody banks, to maintain lower capital levels thanks to the provision. Critics of the Crapo bill seized on that report.
Fed regulators themselves, however, including Vice Chairman for Supervision Randal Quarles, have said that the provision wouldn’t apply to other megabanks.
3. It would undo civil rights protections
The Crapo bill would allow more small banks and credit unions to avoid reporting information relating to home loans they originate or sell, a measure sought by community banks that have said that the requirement is onerous in terms of paperwork.
Liberal Democrats, though, are set to present the provision as a strike against civil rights, on the grounds that it would make it harder to monitor lending patterns.
The current reporting requirements are “essential for federal and state regulators to find patterns of discriminatory or predatory lending,” the Leadership Conference on Civil and Human Rights told lawmakers in a letter Monday.
