Sen. Angus King believes “refinement” of Dodd-Frank will protect Maine’s small community banks. Progressives say it could cause the next financial meltdown.
Sen. Angus King of Maine has drawn criticism for co-sponsoring a bill to roll back regulations on the banking industry. King, an independent who caucuses with Democrats, says he believes the legislation will protect small financial institutions in his home state that have been unfairly penalized for the misconduct of large Wall Street banks during the 2008 financial crisis.
Critics of S.2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act, charge that it puts the U.S. at greater risk for another financial crisis by loosening banking restrictions put in place after the Great Recession. The Senate voted Tuesday by a tally of 67-32 to allow the bill to move forward to a vote, likely within days.
The bill rolls back parts of the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed in 2010 by President Barack Obama, which placed much heavier regulatory scrutiny on banks with more than $50 billion in assets (in other words, banks large enough to be considered “too big to fail”). The new Senate bill proposes to dramatically increase that limit to $250 billion — a high enough threshold to effectively deregulate 25 of the 38 largest banks in the United States. It also provides an exemption to the Volcker Rule (which limits banks’ ability to make the kinds of risky, speculative investments that helped bring about the financial crisis) and requires the U.S. Federal Reserve to engineer regulations so that big and small banks are not subject to the same broad rules.
The bill’s supporters, which include King and more than a dozen Senate Democrats as well as the entire Senate Republican caucus, don’t talk about those 25 big banks that will be deregulated. Instead, they argue that the bill is needed because it gives smaller banks and credit unions relief from overly burdensome regulations.
King said in a statement provided to 50 States of Blue that the legislation “is simply not an unraveling of Dodd-Frank,” and was “thoughtfully negotiated over several years” as a bipartisan effort. He characterized it as a “refinement that will provide targeted relief for small institutions like community banks and credit unions so they can continue to be sources of strength for homeowners, rural businesses, and local economies.”
“The Wall Street reforms that protect consumers are still in place, and the bill would put additional consumer protections in place to help seniors, veterans, renters, and victims of fraud,” King said. “Maine’s community banks and credit unions didn’t cause the financial crisis – they shouldn’t have to pay for it – and neither should Maine people.”
At least some Maine community banks and credit unions agree.
Tina Jamo, president of the Katahdin Federal Credit Union headquartered in Millinocket, Maine, claimed that small community lenders like hers “are getting crushed by Dodd-Frank” in an opinion article Wednesday expressing support for the bill. She said it would “scale back arduous reporting and accounting regulations for credit unions and community banks” and make mortgages cheaper for customers as a result. Nonprofit credit Unions in Maine serve nearly 700,000 members and offer better rates on savings, loans, and credit cards than commercial banks.
Former U.S. Rep. Barney Frank of Massachusetts, a Democrat and one of the eponymous authors of Dodd-Frank, told Vox on Tuesday that he doesn’t think the bill “makes a serious dent” in Dodd-Frank — but said that he would vote against it if he were still in Congress.
Massachusetts Sen. Elizabeth Warren, the bill’s most vocal critic in Congress, countered the argument that the bill benefits small-scale organizations during a floor speech Wednesday.
“These are not small banks,” Warren said, lambasting Republicans and “far too many Democrats” for backing what she says is a gift to banking industry lobbyists.
While King frequently votes with Senate Democrats, he is also a regular collaborator with Maine’s Republican U.S. Sen. Susan Collins on action they perceive to be in the state’s best interest. Both are members of the Common Sense Coalition, a bipartisan group led by Collins that most recently earned praise for helping to end the January government shutdown.
King is up for reelection this year — and some of his opponents expressed clear opposition to the bill and his sponsorship.
“Shame on Angus King for voting to deregulate big banks,” Democrat Zak Ringelstein told 50 States of Blue. “We, the hard-working taxpayers of Maine, are disgusted that Angus King has been bought with hundreds of thousands of dollars from financial firms, including PAC money from TD Bank and Goldman Sachs.”
Ringelstein said that in a time of “historic inequality,” people in the nation’s northeast corner are focused on health care issues including a single-payer system, access to hospitals, prescription drugs and the opioid crisis, as well as gun control, education, and the environment.
“I have never heard a Mainer talk about the need to deregulate the banking industry,” Ringelstein said. “This vote makes it very clear that Senator King and his cronies are not working for the people, and it is urgent that our government puts people first again by electing leaders not influenced by big money.”
Benjamin Pollard, who recently left the Democratic Party to run against King as an independent, told 50 States he was “disappointed” with King’s decision to co-sponsor the legislation, which he opposes due to its potential for “reducing the stability of the U.S. economy” by weakening the Volcker Rule and reducing oversight of 25 of the largest 38 banks.
“[The bill] benefits the country’s largest banks while hurting Maine consumers and investors,” Pollard said.
King’s Republican challengers, State Sen. Eric Brakey and financial planner Max Linn, did not respond to requests for comment.