'Another Giveaway to Wall Street': Advocates Sound Alarm on GOP Bank Deregulation Bill

A broad coalition of advocacy organizations and labor unions warned Tuesday that Republican legislation currently moving through the US House of Representatives would deregulate Wall Street giants and increase the risk of another financial disaster under the guise of aiding community banks.

"This dangerous bank deregulation package would undermine core safeguards and supervision, push risk into the shadows, and make the next publicly financed bailout more likely," an alliance of 28 advocacy groups wrote in a letter to members of Congress. "Further deregulation is especially alarming at a time when financial regulatory agencies are under political attack, pursuing industry-friendly agendas, and starved of resources, and when there is effectively no oversight of financial markets."

Proponents of the GOP's Main Street Capital Access Act (HR 6955), which is backed by major bank lobbying organizations and some Democratic lawmakers, characterize the bill as an effort to bolster small financial institutions by reducing their regulatory burdens. Oscar Valdés Viera, senior policy analyst for private equity and capital markets at Americans for Financial Reform, said that's a ruse.

"Instead of providing meaningful relief from sky high credit card interest rates and late fees, this bill just lets big banks off the hook by weakening oversight, enacting carve-outs and exemptions from banking laws, and creating a pathway for banks to block commonsense regulatory safeguards that could reduce the likelihood and severity of financial crises," said Valdés Viera. "HR 6955 would automatically raise major regulatory thresholds, weaken bank examiners tools, create new avenues to contest supervisory and enforcement decisions, reduce meaningful competition review for many bank mergers, and expand merchant banking arrangements that blur the line between banking and commerce."

"The House majority is pushing a package of risky bank deregulation that is just another giveaway to Wall Street banks when the Congress should be laser focused on the affordability crisis," Valdés Viera said.

The advocacy coalition's letter urging lawmakers to block the legislative package—which could receive a vote in the House as early as Tuesday afternoon—points specifically to Sections 201-204 of the measure. The language in those sections, the coalition warned, "would raise statutory thresholds, extend 'tailoring' well beyond genuinely small and simple banks, and hard-wire automatic future threshold increases."

"As a result, fewer institutions, activities, and risks would remain within baseline guardrails even as the financial system grows more complex and interconnected," the coalition wrote. "The combined effect would be higher leverage and risk-taking, thinner cushions against losses, and weaker prudential standards. It would return the financial system to a pre-2008 pattern in which risk migrates out of view, problems build for years at midsize and large institutions, and the public is left holding the bag when those institutions fail."

The Main Street Capital Access Act, sponsored by Rep. French Hill (R-Ark.)—a major beneficiary of finance industry campaign cash—cleared the House Rules Committee on Monday. Punchbowl reported that Rep. Bill Foster (D-Ill.), the ranking member of the House Financial Services Committee's subcommittee on financial institutions, is urging his Democratic colleagues to support the legislation, despite opposition from the top Democrat on the committee, Rep. Maxine Waters (D-Calif.).

"HR 6955 is Wall Street deregulation hiding as a community bank bill," Waters said in her testimony before the House Rules Committee on Monday. "This bill lets even more of these large banks escape critical safeguards risking more failures. In fact, the sponsors of this bill were so zealous to raise thresholds, they increased one threshold that will aid bad actors who commit fraud against a bank."

"Instead of letting Wall Street put Americans and our economy at risk again," said Waters, "we should be working together to address the affordability crisis caused by Trump’s failed economic policies and endless war with Iran."