Lawmakers in the U.S. Senate began debate this week on a rollback of banking regulations that has divided many Democrats, though supporters, including Sens. Jon Tester and Steve Daines, are backing the measure.
The deal, struck between Tester and Senate Banking Chairman Mike Crapo, R-Idaho, along with other red-state Democrats, looks to ease a number of rules they believe are hurting rural banks and borrowers seeking access to capital.
Tester said the bill was crafted after years of negotiations and will, if passed, spur economic growth, increase access to capital and protect consumers. He said bank consolidation has left many communities underserved.
“Community banks and credit unions didn’t cause the financial crisis, but they have suffered under the one-size-fits-all rules designed specifically to rein in risky behavior on Wall Street,” Tester said. “When a community bank is bought out by a big bank, their business model changes and it is no longer tailored to fit the needs of the community.”
When the economy crashed in 2008, Congress acted by passing the Dodd-Frank Act in 2010 to crack down on Wall Street. Since then, however, supporters of reform say the regulations meant for the big banks have actually hurt local lenders, mostly in rural states like Montana, costing them both time and money.
Prior to the financial crisis, Tester said, Montana had 72 chartered banks, though that’s now down to 49. Many of those banks closed down due to what Tester has called burdensome federal regulations.
It’s a point on which Montana’s two senators agree.
“Dodd-Frank regulations are suffocating Montana’s rural banks and credit unions, and ultimately are hitting their customers the hardest,” Daines said. “This bill takes a long overdue step in the right direction and begins to give local community banks and credit unions the relief they need to stay in business.”
Opponents, including many Democrats, suggest Congress has forgotten the crash of a decade ago caused by giant banks. Sen. Elizabeth Warren argued Tuesday that supporters are catering to years of sustained back lobbying by the banking industry.
The measure, however, has the support of the Montana Bankers Association.
“This important bipartisan measure will allow our banks to do what community banks are designed do – help our customers, grow businesses and invest in our communities,” said Steve Turkiewicz, the president and CEO of the Montana Bankers Association.”
Tester said the measure would ease mortgage rules for small lenders while protecting consumer information. It includes free fraud alerts for one year for those victimized by Wells Fargo and Equifax, and it allows consumers to freeze their credit for free.
Tester said the agreement would also benefit small and mid-sized banks while holding larger banks, including U.S. Bank and Capital One, to higher standards.