The U.S. Senate likely will pass a major Wall Street deregulation bill this week with Democratic support. It’s a package that reduces safeguards for two dozen of the three dozen largest banks, enables smaller banks to speculate with deposits, severs important consumer safeguards and more.
"Creating banking law under the influence of campaign contributions leads directly to crises that have visceral impacts on millions of Americans."
After Senate Democrats stood united against President Donald Trump’s effort to replace the Affordable Care Act and cut corporate taxes, it’s disappointing that so many are lining up to confer such a dramatic gift on Wall Street.
Why do some Democrats support this bill, known as S. 2155? Some point out that most of the supportive Democrats face reelection in 2018 in states that Trump carried; these senators want to show they can work with Republicans. But there is no public clamor from Democrats or Republicans to roll back protections against Wall Street recklessness. In fact, polls show that Republican voters support tough Wall Street reform almost as strongly as Democrats. And Trump famously campaigned against Goldman Sachs and Wall Street, even though he has since governed to benefit the big banks.
If the story about trying to appeal to Republican and moderate voters doesn’t hold up, how to account for the Democrats’ readiness to roll back popular rules to control Wall Street wrongdoing? The answer lies in Wall Street’s ongoing political power, not its public support, and specifically Wall Street’s sizeable political contributions. The financial sector is the most lucrative source of campaign contributions for nine of the 13 Democratic senators co-sponsoring the deregulatory bill (technically 12 Democrats and one Independent).
For the four co-sponsors of the bill on the Senate Banking Committee, Wall Street is the number one source for contributions. These senators are Joe Donnelly (D-Indiana), Heidi Heitkamp (D-North Dakota), Jon Tester (D-Montana) and Mark Warner (D-Virginia). They negotiated the package with Senate Banking Committee Chair Mike Crapo (R-Idaho) and a handful of other Republicans. Heitkamp, Donnelly and Tester are also Numbers 1, 2 and 3 in the list of top 20 senatorial recipients of contributions from commercial banks. Large commercial banks are the prime beneficiary of this bill. No. 4 is Sen. Dean Heller, (R-Nevada), a vulnerable Republican facing reelection in a state Hillary Clinton won. Heller voted for the bill in committee.
Democrats off the committee signed on to the bill, in a few cases, after securing an additional provision. For example, Sen. Christopher Coons (D-Delaware) signed on after negotiating improvements for veterans in credit reporting.
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There are many types of corporations that shower money on politicians, from health care providers to manufacturers to technology firms. Many businesses contribute primarily to their home state representatives. Thus one would expect a senator from Indiana to receive more from the agriculture sector or a West Virginia senator to receive more from the mining industry. But banking is a lucrative source for all senators, especially Democrats who may not have the same relationship with business generally as do their Republican counterparts.
"The Senate should reject S. 2155 and instead approve legislation that America supports, such as breaking up the megabanks."
In the current election cycle, the finance sector is the leading contributor among all sectors to all members, with a catch-all “other” in second place, followed by “ideology,” “miscellaneous business” and “lawyers.” The next identifiable business sector, in sixth place, is health care. Wall Street already has contributed $229 million in the 2018 election cycle. The transportation sector, where Trump plans an infrastructure initiative that should generate a political spending gusher, has contributed only $26 million.
Banks depend on government. It’s the only sector where Uncle Sam guarantees its debt in the form of FDIC insurance on deposits from customers. It is a sector that routinely has been bailed out in bad times, such as in 2008, the late 1990s, the late 1980s and before. Apparently, abiding campaign contributions are required to sustain these favors.
Unfortunately, complexity masks banking policy. That means the changes now contemplated by the Senate may receive inadequate public attention. In the glut of pressing problems, from gun violence to a stand-off with North Korea, many citizens may not be riveted by the proposed oversight reduction for banks such as BB&T.
Nevertheless, creating banking law under the influence of campaign contributions leads directly to crises that have visceral impacts on millions of Americans. The savings and loans crisis of the 1980s led to recession, especially in the Southwest. The crash of 2008, rooted in then-obscure products such as collateralized mortgage obligations, cost millions of Americans their jobs, homes and savings.
The Senate should reject S. 2155 and instead approve legislation that America supports, such as breaking up the megabanks.