Democrats split over support for GOP-led bank bill
A Republican-led proposal to roll back banking regulations is drawing support across party lines in the Senate, building momentum for the biggest rewrite of financial rules in years and setting the stage for a showdown among Democrats.
In an unusual development, nine Democrats — enough needed to pass the bill with Republicans in the months to come — are co-sponsoring the package, which would scale back rules for many banks.
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The legislation was negotiated by Senate Banking Chairman Mike Crapo (R-Idaho) with a group of red-state Democrats who have been working for years to ease regulations that they say are stifling lending.
They are pushing ahead despite opposition from liberal lawmakers, including two prominent finance industry critics — Sen. Sherrod Brown of Ohio, the top Democrat on the Banking Committee, and Sen. Elizabeth Warren of Massachusetts, who has attracted a massive following by attacking Wall Street. Brown and Warren argue that the proposed regulatory rollbacks go too far.
“Clearly, they’re my friends and clearly I don’t agree with them or I wouldn’t have put this package together,” said Sen. Joe Donnelly (D-Ind.), one of the members who negotiated the legislation. “People can make up their own minds.”
The debate is exposing philosophical differences in the Democratic Party as it struggles to define itself on economic issues in the wake of last year’s stunning electoral defeat.
For years, Senate Democrats have maintained a nearly impenetrable wall against efforts by the banking industry and Republicans to roll back sweeping financial regulations that President Barack Obama signed into law in 2010.
That landmark legislation, known as Dodd-Frank, imposed new rules across the finance industry, affecting the biggest Wall Street banks and the smallest local lenders.
Revisions by Congress have been few and far between over the years as Senate Democrats refused to help enact the long list of rollbacks passed by the Republican-controlled House of Representatives.
“There’s always been concern that making any changes might be opening up Pandora’s box,” said Emily Liner, senior policy adviser at the centrist think tank Third Way. “There’s definitely leaders of the party who don’t want to open up that box.”
Now, with Republicans making a new push to rewrite financial industry rules while they control Washington, a number of Democrats who have long been open to revising Dodd-Frank are volunteering to help ease regulations in the name of promoting economic growth.
The effort was years in the making.
Two years ago, when Senate Republicans drafted another wide-ranging “regulatory relief” package that Democrats opposed, a group of moderates from both parties sought to salvage the opportunity by hashing out areas of common ground.
Although they got close, a formal bill never saw the light of day. Dodd-Frank remained largely untouched.
Last November’s Republican sweep of the White House and Congress re-energized the drive to pare down the law. Over several months of this year, Crapo and Brown tried and failed to work out an agreement.
Along the way, moderate Democrats urged them to hurry up and get a deal done. Warren drew clear red lines for any rollback of regulations.
On Halloween, Brown said he and Crapo were unable to reach a compromise “that protects consumers while supporting small banks and credit unions.”
With Brown stepping away, the same group of moderate Democrats wasted no time in taking their own stab at a new bill in cooperation with Crapo.
The new negotiations were driven by Democrats who, like Brown, are up for reelection in states that Donald Trump carried in last year’s election: Sens. Heidi Heitkamp of North Dakota, Jon Tester of Montana and Donnelly. Virginia’s Mark Warner also participated in the talks.
With staff working around the clock, Crapo and the Democrats announced an agreement on Nov. 13. Crapo said the package would boost economic growth by “right-sizing regulation.”
The legislation they released was co-sponsored by 10 Republicans, nine Democrats and one independent.
“Our bill is an example of how if Democrats and Republicans can put partisanship aside and work together, we can reach real compromises that support the country,” Heitkamp said.
The deal includes several proposed regulatory revisions intended to help smaller, community banks — a sector of the finance industry with broad political support.