When I joined the Senate, the United States was losing about 750,000 jobs a month. Because of reckless gambles on Wall Street, our economy reeled from the worst financial crisis since the Great Depression. Over the following year, I worked on the Senate Banking Committee to help write the most consequential Wall Street reforms since the 1930s, known as Dodd-Frank.
When we passed the bill in 2010, the right howled about its new regulations and consumer protections. The left worried its reforms did not go far enough. I supported the final bill as a major step forward to protect American consumers and our broader economy.
That is not to say the bill was perfect. When it passed, many on both sides worried that some of the new regulations would needlessly apply to smaller banks that had done nothing to cause the financial crisis. In less affluent corners of the country – from our inner cities to small towns – these banks are vital sources of credit. As the industry consolidates and community banks shutter, it has become harder for small businesses and individuals with good (but not perfect) credit to receive loans.
Since 2010, Republicans have used this dynamic as an argument for repealing Dodd-Frank. President Donald Trump promised to do the same. At every turn, Democrats united and fought to defeat these efforts.
The compromise that the Senate passed this week does not undermine Dodd-Frank. It preserves the Consumer Financial Protection Bureau. It maintains oversight of derivatives trading. It preserves resolution authority, which allows the government to dismantle large, failing banks to minimize risk to the economy. Just as before, big banks can no longer expect taxpayers to bail them out for reckless decisions. These were, and remain, the essential components of Dodd-Frank.
If you believe the critics, this compromise guts Wall Street reform. The facts say otherwise. It is a terrible irony of the Great Recession that the largest banks have become even larger. This bipartisan agreement leaves the largest banks as they are with regard to Dodd-Frank and provides much-needed relief to smaller banks and their customers. It is no coincidence that the bill’s Democratic sponsors come not from major financial hubs, but rural areas where small banks provide a disproportionate share of loans.
The Senate agreement is not without flaws, but it locks in the essential features of Wall Street reform. With these modifications in place and reasonable adjustments made to smaller bank rules, Republicans will no longer be able to use the plight of community banks and small businesses to justify an effort to attack the broader law. Now it’s up to the House to take up this bipartisan compromise, which it should pass without changes.
As we move forward, Democrats should consider two questions: One, are we going to fight for regulations that don’t accomplish their stated purposes? Two, are we going to let political hyperbole keep us from addressing the legitimate concerns of small businesses, community banks and millions of creditworthy Americans?
On issue after issue, voices on the left and right routinely decry modest concessions as a betrayal of principle. More often than not, that principle turns out to be little more than a tactic to garner media attention by casting small differences on policy as cataclysmic. Until this changes, we will struggle to make progress as both parties retreat to their corners instead of doing the unglamorous, vital work of governing.
Michael Bennet, D-Denver, represents Colorado in the U.S. Senate. Special to The Washington Post (c) 2018.
