Democrats on the Senate Banking Committee have countered Republican Chairman Richard Shelby’s proposal to overhaul banking regulation with a plan of their own, one that would limit deregulation to small banks and credit unions.
The outline, released by the panel’s ranking Democrat, Sen. Sherrod Brown of Ohio, two days before a scheduled mark-up, mostly retains the community bank provisions of Shelby’s reform, while dropping a range of other items that liberals had criticized as giveaways to Wall Street.
Brown proposes to lower the burden of complying with regulations and filling out paperwork for small banks by exempting them from some privacy notification mandates. Under his plan, very small banks would be examined every 18 months.
The Democratic legislation also would relieve small banks from new rules on mortgages imposed by the 2010 Dodd-Frank law, provided that they are held by the banks and do not include some of the dangerous features seen in risky loans in the run-up to the crisis.
Overall, the bill is a modest relief package for community banks. Shelby’s proposal, on the other hand, would have been the largest reorganization of financial regulation since Dodd-Frank.
Stating a commitment to working on a bipartisan basis, Brown said the Democrats’ “targeted proposal would help Main Street financial institutions and better protect consumers in a manner that should win broad bipartisan support and be signed into law.”
Brown is one of several more liberal Democrats on the panel, which also includes other top critics of Wall Street practices such as Sen. Elizabeth Warren of Massachusetts and Sen. Jeff Merkley of Oregon.
Sen. Heidi Heitkamp of North Dakota, known as one of the more moderate Democrats on the committee, expressed support for Brown’s proposal shortly after it was announced.
“My goal is to pass bipartisan legislation which can actually become law that gives community banks and credit unions needed relief so they can continue to support families, small businesses and rural communities,” Heitkamp said. “The fact is that our proposals can be passed and signed into law tomorrow — so let’s make that happen.”
Shelby likely would need the support of less liberal Democrats on the committee to see his proposals become law.
Those proposals include major relief for regional banks that are larger than most community banks but are not thought to pose the same risks to the economy that megabanks would if they failed. Shelby’s bill also would reshape the Dodd-Frank system for identifying non-banks that could pose a threat to the financial system, significantly change the terms of the government’s bailout of Fannie Mae and Freddie Mac, and other measures to change the financial regulatory landscape.
