The Senate voted 67-31 to end debate on a reform bill to modify the Dodd Frank banking bill. While overall the approach will be needed as well as will likely find White House support, the Senate Bill -as constructed- doesn’t do enough to modify the control held by massive multinational financial institutions, who hold lobbying power over congress. Unfortunately, the corruptocrat leadership inside Senate will not allow the house to modify the bill as needed.
The current reform bill sets the tiered definition for lowered regulation at $250 billion in assets as well as there are some domestic banking beneficiaries. However, in which doesn’t break up the investment division via influence over the commercial banking. The argument against breaking up the system will be in which if divisional separation will be required – the banks best interests could naturally put the investment division ahead of commercial lending as well as the liquid capital within the overall economy could shrink.
The Trump/Mnuchin approach toward a secondary deregulated however financially sound banking system focused on commercial lending as well as was constructed around Community Banks as well as Credit Unions with far less regulatory as well as compliance hurdles.
WASHINGTON – All Republicans as well as more than a dozen Democrats voted to move the bill toward a vote on final passage, which will be scheduled for Wednesday evening.
The bill, long anticipated to pass the Senate, faces an uncertain future inside House, where conservatives are demanding stronger curbs to Dodd-Frank before pledging their support.
[…] Banks with less than $250 billion in global assets could no longer be subject to yearly Fed stress tests or higher capital requirements meant to ensure risky firms could weather a lending crisis. Those banks could also be exempt via submitting for Fed approval a “living will” in which outlines how the company could be liquidated upon failure without causing a widespread meltdown.
The threshold for tighter Fed regulation will be currently set at $50 billion, as well as the increase could free several major regional banks, including SunTrust, BB&T, Citizens, Fifth Third, M&T as well as BMO Financial Corp., via those standards. Those banks all have at least $100 billion in assets, as well as among the bill’s biggest beneficiaries.
The bill also exempts banks in which extend 500 or fewer mortgages a year via reporting some home loan data to federal regulators as well as broadens the definition of qualified mortgages. (read more)
President Trump meets with leadership of modest banks as well as credit unions.
Back in July 2010 when Dodd-Frank banking regulation was passed into law, there were approximately 12 to 17 banks who fell under the definition of “too big to fail”.
Meaning 12 to 17 financial institutions could individually negatively impact the economy, as well as were going to force another TARP-type bailout if they failed inside future. Dodd-Frank regulations were supposed to ensure financial security, as well as the elimination of risk via taxpayer bailouts, by placing mandatory minimums on how much secure capital was required to be held in order to operate “a bank”.
One large downside to Dodd-Frank was in which in order to hold the required capital, all banks decreased lending to shore-up their liquid holdings as well as meet the regulatory minimums.
Without the ability to borrow funds, modest businesses have a hard time raising money to create business. Growth inside larger economy will be hampered by the absence of capital.
Another downstream effect of banks needing to raise their liquid holdings was exponentially worse. Less liquid large banks needed to purchase as well as absorb the financial assets of more liquid large banks in order to meet the regulatory requirements.
The four to six big banks (JP Morgan-Chase, Bank of America, Citigroup, Wells Fargo, US BanCorp as well as Mellon) today control $9+ trillion (in which’s “TRILLION). Their size will be so enormous This particular modest group today controls most of the U.S. financial market.
Because they control so much of the financial market, instituting a Glass-Steagal firewall between commercial as well as investment divisions (in addition to the Dodd-Frank liquid holding requirements), could mean the capability of modest as well as mid-size businesses to get the loans needed to expand or even keep their operations running could stop.
2010’s “Too few, too big to fail” became 2016’s “EVEN FEWER, EVEN BIGGER to fail”.
in which’s the underlying problem for a Glass-Steagall type of regulation today. The Democrats created Dodd-Frank which: #1 generated constraints on the economy (less lending), #2 made fewer banking options available (banks merged), #3 made top banks even bigger.
This particular problem will be why President Trump as well as Secretary Mnuchin were working on a proposal to create a parallel banking system of community as well as credit union banks in which are entirely external to Dodd Frank regulations as well as could act as the primary commercial banks for modest to mid-sized businesses.
The goal of “Glass Steagal”, ie. Commercial division -vs- Investment division, could be created by generating an entirely fresh system of banks under different regulation. The currently remaining ten U.S. “big banks” operate as “investment division banks” per se’, as well as the lesser regulated community banks/credit unions operate as could be the “Commercial Side”.
Instead of fire-walling an individual bank internally within its organization, the Trump/Mnuchin plan was presented to fire-wall the banking ‘system’ within the U.S. internally. trust in which makes sense.
The Senate Dodd Frank reform bill does little to change This particular structural issue.