{"id":368649,"date":"2018-07-09T11:38:53","date_gmt":"2018-07-09T10:38:53","guid":{"rendered":"http:\/\/rinf.com\/alt-news\/newswire\/why-killing-dodd-frank-could-lead-to-the-next-crash-2\/"},"modified":"2018-07-09T11:38:53","modified_gmt":"2018-07-09T10:38:53","slug":"why-killing-dodd-frank-could-lead-to-the-next-crash-2","status":"publish","type":"post","link":"http:\/\/rinf.com\/alt-news\/newswire\/why-killing-dodd-frank-could-lead-to-the-next-crash-2\/","title":{"rendered":"Why Killing Dodd-Frank Could Lead to the Next Crash"},"content":{"rendered":"
<\/p>\n

In the age of Trump, bipartisanship is considered a sin. So one would think that when Republicans and Democrats do pass a law together, it\u2019d be for something so popular, it couldn\u2019t be questioned politically: a nonbinding resolution on the cuteness of puppies, maybe, or a national ice cream giveaway.<\/p>\n

Nope. The rare bipartisan bill turned out to be a rollback of the Dodd-Frank financial-reform act. More than 80 percent of Democrats and two-thirds of Republicans want tougher rules on banks. Yet this was our Trump-era kumbaya moment: a bank deregulation bill!<\/p>\n

Ostensibly passed to address the causes of the 2008 crash, the Dodd-Frank Act has instead spent more than half a decade now as a hostage to a payola Congress, with both parties taking turns cutting it down and delaying its implementation. The latest indignity is S.2155, a.k.a. the \u201cEconomic Growth, Regulatory Relief, and Consumer Protection Act.\u201d Supposedly designed to help some banks by reducing capital requirements and ending regular \u201cstress tests,\u201d the act is really more like helping ships steam faster by allowing them to ditch their lifeboats.<\/p>\n

But the bill isn\u2019t just unnecessary \u2013 the banking sector smashed records with $56 billion in profits in this year\u2019s first quarter \u2013 it\u2019s also a Wall Street handout disguised as an aid to \u201cMain Street\u201d banks.<\/p>\n

Ohio Sen. Sherrod Brown, a longtime critic of the \u201cToo Big to Fail\u201d banking system, opposed the bill. He pointed out upon passage that in one section of the act, \u201cthe change of just one word\u2009.\u2009.\u2009.\u2009forces the Fed to weaken the rules even for the largest banks.\u201d<\/p>\n

The microchange Brown refers to is a masterstroke of deregulatory trickery, one that should go in the Hall of Fame of legislative chicanery. The original Dodd-Frank Act said the Federal Reserve may consider weakening safety rules for a particular bank. The single word change of \u201cmay\u201d to \u201cshall\u201d would mandate the Fed to consider every request for special treatment. If Bloodsucking Bank A thinks it deserves relaxed regulation, it could sue the Fed to consider its request.<\/p>\n

Because the rules weakened under this section cover almost all the restrictions in Dodd-Frank, this \u201cmay-to-shall\u201d trick could be the mother of all loopholes. \u201cIt\u2019s potentially the most damaging thing in the bill,\u201d is how one Senate aide put it.<\/p>\n

But why did this bill even pass? Only 50 Republicans backed the rollback, meaning even a few members of a dependably craven Republican caucus hesitated to pull the trigger. That means they needed one Democratic vote to pass this foul thing. They got 17. Why? What made this bill the weak link in the battle line against Trump\u2019s agenda?<\/p>\n

The 2008 crash was caused when financial companies, high on greed and the temptations of an irrationally exuberant economy, borrowed beyond their means. Leveraging themselves to the hilt, banks bet your kids\u2019 future on a losing roulette spin known as the subprime-mortgage market. Post-crash, the obvious reform was to make sure banks would have enough assets on hand that they wouldn\u2019t need bailouts the next time they ruined themselves at the tables.<\/p>\n

Dodd-Frank told them they had to either borrow less (\u201creduce leverage\u201d) or have a bigger stack in reserve (\u201craise capital requirements\u201d). They had to pass regular \u201cstress tests,\u201d create contingency plans in case of collapse, and, through the so-called Volcker Rule, keep their depository and investment banking operations separate.<\/p>\n

In recent years, however, lobbyists began to complain that the restrictions were hurting small regional banks. Currently, the rules apply to any bank with more than $50 billion in assets. The new bill raises that to $100 billion immediately, then, potentially, to $250 billion. If the carve-out goes to $250 billion in assets, roughly 99 percent of banks will be exempted from the Dodd-Frank safety provisions. So, yes, it helps out your local bank. And basically all the other banks too.<\/p>\n

Still, Republicans and Democrats alike successfully pitched the bill as helping small business \u2013 what Elizabeth Warren described as using community banks as a \u201chuman shield.\u201d<\/p>\n

It\u2019s a huge victory for Trump \u2013 eliminating Dodd-Frank was such an urgent need for His Orangeness that an executive order mandating the act\u2019s deconstruction was one of his first policy moves. Like his White House hirings of so many Goldman Sachs vets after loudly campaigning against the bank, Trump showed his true colors when he made killing Wall Street\u2019s most hated law a high priority.<\/p>\n

Then again, the Democrats showed their colors when they gave him the win. Nobody will say so, but everyone on the Hill knows why this bill passed. According to the Center for Responsive Politics, three of the bill\u2019s Democratic co-sponsors, North Dakota\u2019s Heidi Heitkamp, Indiana\u2019s Joe Donnelly and Montana\u2019s Jon Tester, are three of the Senate\u2019s biggest recipients of financial-services donations. Quelle surprise!<\/p>\n

This would be merely politically disgusting, were it not for the consequences in an overheated economy. Remember how tossing the Glass-Steagall Act during the Internet boom worked out? We should be increasing safety standards, not eliminating them. \u201cWith debt levels higher than before the last crash, a stock market bubble and wage stagnation,\u201d says Dennis Kelleher, head of the watchdog group Better Markets, \u201cnow is the worst time to deregulate the financial industry.\u201d<\/p>\n

We\u2019ve been here before \u2013 in an economy that feels shakier than suspiciously swollen stock market numbers would indicate. Either Trump is an economic genius, or we\u2019re in for a correction soon. Who feels like taking off the life jacket?<\/p>\n<\/div>\n

Via Common Dreams<\/a>. This piece was reprinted by RINF Alternative News<\/a> with permission or license.<\/b><\/p>\n","protected":false},"excerpt":{"rendered":"

In the age of Trump, bipartisanship is considered a sin. So one would think that when Republicans and Democrats do pass a law together, it\u2019d be for something so popular, it couldn\u2019t be questioned politically: a nonbinding resolution on the cuteness of puppies, maybe, or a national ice cream giveaway. Nope. The rare bipartisan bill […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[519],"tags":[],"class_list":{"0":"post-368649","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-newswire"},"_links":{"self":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts\/368649","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/comments?post=368649"}],"version-history":[{"count":0,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts\/368649\/revisions"}],"wp:attachment":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/media?parent=368649"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/categories?post=368649"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/tags?post=368649"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}